News Corp.’s Shares Plunge

News Corp. shares fell almost 8% after Chairman Rupert Murdoch said the group’s U.S. TV unit may experience “weakness” this year and the sale of shares in the group’s satellite-TV arm would be delayed.

Murdoch said at an annual shareholders meeting that the group’s U.S. TV and film unit, Fox Entertainment Group Inc., may see a slowing in advertising revenue, mainly because of Internet companies spending less on marketing in the wake of Nasdaq’s 25% fall since the start of September.

“I have to say the immediate future for [the group’s U.S. TV business] and our competitors looks a little uncertain,” Murdoch said. “There are signs of weakness in the next couple of months.”

News Corp. fell 86 cents, or 7.7%, to $10.36 in Sydney, its biggest one-day percentage decline since April 17. The stock is up about 35% year-to-date.

News Corp.’s American depositary receipts fell $2.81 to $40.69 on the New York Stock Exchange. Each ADR represents four ordinary shares. Fox Entertainment rose 81 cents to $19.63 after falling as low at $18.44, the shares’ lowest price since they were first sold to the public in 1998. Fox shares have fallen 21% this year.

“Roughly half their cash flow comes from Fox, so it’s the most profit-sensitive [issue] for the company,” said George Colman, a media analyst with Salomon Smith Barney Australia Ltd., who has an “outperform” recommendation on News Corp.

Murdoch, who was leading News Corp.’s 22nd annual shareholders’ meeting, also said the company wouldn’t sell shares to the public in its satellite-TV unit, Sky Global Networks Inc., in November, as earlier planned.

“A month is far too short a timetable,” Murdoch said. “It’s a possibility that we could get back to the U.S. Securities and Exchange Commission, if everything went like lightning, in three weeks.”

Murdoch said the company was holding talks with potential partners to invest in Sky Global. “We hope to have a very successful float of that in the near future,” he said.

Sky Global could raise $5 billion when it sells shares, analysts said, making it the largest initial public offering for a media company.

The largest worldwide satellite-TV provider, it owns the Star system in Asia, News Corp.’s 40% stake in British Sky Broadcasting, its 43% stake in Gemstar TV-Guide International Inc. and other holdings in Latin America and Europe. Murdoch recently said the company was worth $40 billion.

“I think obviously the delays [with Sky Global] are making an enormous difference” to investors’ expectations, said Lucinda Chan, associate director of private client investment at Macquarie Equities Ltd. in Sydney. “The sentiment is not positive.”

Murdoch said Vivendi may take a stake in Sky Global in exchange for its 22.7% stake in British Sky Broadcasting Group. The European Union has told Vivendi to sell the stake within two years so it can buy Seagram Co. and Canal Plus.

“The likelihood is either they [Vivendi] will be allowed to take Sky Global shares in place of BSkyB or else they will get someone to place them around the market,” Murdoch said. “They’ve declared publicly that they are not interested in cash.”

In the last year, the French media and utility company has built its holding in BSkyB as a way to build an alliance with News Corp.

“I believe the BSkyB problem is going to be a little bit more difficult than they think, so it’s not going to be smooth sailing for [News Corp.],” Chan said.