Wall St. Calm After Unexpected Exit

Aug 1, 2005  •  Post A Comment

Lachlan Murdoch’s surprise announcement Friday that he will step down as News Corp.’s deputy chief operating officer is unlikely to have much of an impact on the company’s regular operations or its stock price, analysts said. But it is raising fresh questions about Chairman and CEO Rupert Murdoch’s succession plans.

Generally, Wall Street had little reaction to the news that Mr. Murdoch’s eldest son will leave his management post by Aug. 31 but will remain on the News Corp. board. Many noted that with News Corp. President and Chief Operating Officer Peter Chernin in place, little is expected to change at the media giant.

“From the standpoint of the whole company, it would have been a lot more significant on the stock price if Peter Chernin were to make a change of venue, though that is not to say that [Lachlan Murdoch’s departure] is not of interest or importance,” said Harold Vogel, CEO of Vogel Capital Management.

Jessica Reif Cohen, a Merrill Lynch media analyst, said she expects 33-year-old Lachlan Murdoch’s departure to have “minimal impact on News Corp.’s operations.” She said she expects Rupert Murdoch’s youngest son, James, 32, who currently runs British satellite company BSkyB, to become the heir apparent to the media empire his father built.

“However, this remains a very long-term issue, as we continue to expect Mr. Chernin will take the helm of the company when Rupert Murdoch retires,” she added. “James … should eventually take control, but not until Mr. Chernin decides to leave the company and/or the board deems [James] ready.”

Through a spokeswoman, Mr. Chernin had no comment.

Regardless of whether James Murdoch is, by default, the new successor, the mere suggestion of him as a replacement might not be enough to satisfy investors, who in recent years have become more vocal about their demands for a clear succession plan, especially at large media companies.

Viacom’s octogenarian Chairman and CEO Sumner Redstone found that out over the past year, after Wall Street pressed him to name a successor and he set up a horse race between his two lieutenants, co-COOs Tom Freston and Leslie Moonves, that was later abandoned for a new plan to split up the company with each executive running his own unit. The Walt Disney Co. likewise learned the same lesson after shareholders complained loudly that CEO Michael Eisner had not successfully articulated a succession plan. The company now has one, with President and COO Robert Iger expected to assume the CEO post in October.

At News Corp., the 74-year-old Mr. Murdoch has long made clear that he is grooming his sons to take over the family business when he retires. While both sons at one point were seen as having a shot, Lachlan Murdoch emerged as the more likely candidate, particularly when he joined the office of the chairman in 1999. That position was solidified last year when James Murdoch stepped down from the News Corp. board to assume the CEO title at BSkyB.

In addition to Lachlan, who plans to return to Australia from New York, and James Murdoch, who is based in London, the elder Mr. Murdoch has a 37-year-old daughter, Elisabeth, who at one time was a managing director at BSkyB, but quit in 2000 to start her own television production company in London. She has made clear that, for at least the near term, she has no interest in returning to the News Corp. fold.

Rupert Murdoch has three other daughters: Prudence, who is from his first marriage and has not had a role in the News Corp. empire, and two very young daughters with his third and current wife, Wendi Deng.

Lachlan Murdoch joined the company in 1994 and has served in many roles. He started his career at News Ltd., the Sydney, Australia-based parent company of News Corp.’s Australian operations, cleaning presses at the Mirror newspaper before moving up the management ranks. He eventually became general manager of Queensland Newspapers, publisher of The Australian and then deputy chief executive of News Ltd.

He joined the News Corp. board in 1996 and became a member of the office of the chairman in 1999. Since then he has had responsibility for publisher HarperCollins; News America Marketing, the freestanding marketing inserts business; and presently serves as chairman of News Ltd., chairman of the 35-station Fox Television Station Group and publisher of The New York Post. One of his key moves at the station group was a deal made at NATPE this past January to carry “The Tyra Banks Show,” beginning this fall, which marks the first time in several years that Fox stations has carried a Warner Bros. program.

It was perhaps his role as publisher of the New York tabloid that generated the most headlines for Lachlan Murdoch. He replaced the entire senior management team of the paper in an effort to make it profitable, and in the process helped fuel a circulation surge at a time when most print publications are posting flat circulation numbers.

In leaving, Lachlan Murdoch said: “I have today resigned my executive position at News Corp. I will remain on the board and I am excited about my continued involvement with the company in a different role.”

For his part, Rupert Murdoch appeared to remove any suggestion that he might have pushed out his son, saying in a statement: “I am particularly saddened by my son’s decision and thank him for his terrific contribution to the company, and also his agreement to stay on the board and advise us in a number of areas. I have respected the professionalism and integrity that he has exhibited throughout his career at News Corporation.

“His achievements include driving all of his reporting divisions to record profits and the New York Post to its highest-ever circulation. I am grateful that I will continue to have the benefit of Lachlan’s counsel and wisdom in his continued role on the company’s board.”