Gemstar Drags News Corp. Down

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News Corp. took a $1.9 billion write-down in its fiscal fourth quarter
related to the decline in value of its investment in Gemstar-TV Guide
International Inc., driving its losses for the period to $1.74 billion.

This is the second consecutive quarter News has had to take a significant
write-down for its 42 percent equity interest in Gemstar. In the fiscal third
quarter, that write-down was $4.2 billion.

Gemstar stock has fallen about 87 percent this year as it weathered problems
concerning its accounting methods and a failure to win two highly publicized
patent-infringement lawsuits.

News tried to stem the bleeding last quarter, when it installed Fox Cable
Networks Group CEO Jeff Shell as Gemstar chief operating officer. In a press
release, News said it is 'working closely with Gemstar's management to take the
necessary steps to restore the value of that important asset.'

But on a conference call with reporters, News chairman Rupert Murdoch
declined to elaborate.

'It's up to Gemstar to make any announcements,' Murdoch said on the call.

Without the one-time noncash charge, News would have reported earnings of
$114 million (8 cents per share), down from $145 million (12 cents) in the same
period last year.

Despite the downturn, News' cable networks showed strong performances,
reporting operating cash flow of $34 million in the period versus a $1 million
operating loss last year. Revenue rose 29 percent to $564 million.

Those gains were despite a $30 million charge from unpaid programming fees
related to Adelphia Communications Corp.'s bankruptcy filing.

Although that figure is up from previous estimates, News president and COO
Peter Chernin said on a conference call with analysts that Adelphia has been
current with its payments since July 1. Adelphia filed for Chapter 11 bankruptcy
protection June 25.

News said it is also in negotiations with Cablevision Systems Corp. regarding
News' put rights for its 40 percent interest in five regional sports networks
owned by the MSO's Rainbow Media Holdings Inc. subsidiary. Those put rights are
exercisable in December.

Murdoch -- who said he valued the stake 'in excess of $1 billion' -- added
that News is currently in discussions with Cablevision.

'It depends on what they offer,' Murdoch said on the conference call. 'If
they say, `Here's $1 billion or $1.2 billion,' we'll take the money and be very
happy.'

But given Cablevision's current cash crunch -- it faces a $550 million to $1
billion funding gap in 2003 -- buying out News' stake of the channels is
unlikely.

Most analysts expect News to swap its 40 percent interest in Madison Square
Garden Network for full control of the regional sports networks.

News stock rose 73 cents to $21.48 per share Wednesday.

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