A couple of weeks ago we were confused when we learned that after a huge redesign and content focus shift of Myspace (little m, big space), that the company, owned by News Corp., was laying off several hundred of its employees. This week we uncovered the answer: News Corp. is done with Myspace. Their COO Chase Carey announced that they are "actively engaged" in talks regarding "strategic alternatives". I read between the lines.
The interesting thing about this is that he mentioned it in an earning call and not during your usual press conference or through a press release. When one of the market analysts asked for an estimated loss projection for Myspace, Carey simply reiterated the same sentence. Basically, they are shopping around for offers.
With a new content focus and structure in place, we believe now is the right time for News Corp. to consider strategic options. We have seen some encouraging traffic metrics in the last several weeks. However, we recognize that the plan to allow MySpace to reach its full potential may be best under a new ownership structure.
For more on the breakup, follow the break.
News Corp. also has a $275 million charge for its digital operations: $107 million for restructuring and the other $168 million is a writedown, we'd have to assume for Myspace. There's IGN in the Digital Media Group, too, but we are guessing that News Corp. understands that eliminating positions is an expensive thing and they want to write down the Myspace's value. From what we've gathered so far, we don't have an idea on how much of that charge is specifically for Myspace, so most of this is speculation but it does put a lot of questions on the table.
The only official thing we know aside from the conference call is this text:
The Company recorded a $275 million pre-tax charge for the impairment of goodwill related to the Digital Media Group and an organizational restructuring at MySpace.
We do know that Carey has said that there are a couple of buyers interested and we can only wonder who those companies may be. How much they'd pay is another issue entirely, however. News Corp. purchased Myspace in 2005 for $580 million but some analysts are valuing the company as low as $50 million right now. Talk about a huge loss on investment. It looks as though the restructure was too little, too late and couldn't right the sinking ship.