Investment Conclusion: Dead Money Until Serious Questions are Resolved:
For shareholders, no good can come of the utterly unnecessary self-inflicted wound involving widespread and seemingly indiscriminate phone hacking at the News of the World (and now apparently the venerable broadsheet The Sunday Times) of politicians, celebrities, dead soldiers and murder victims. Without question, the revelations and subsequent penalties either criminal, civil or strategic will impair earnings performance, earnings multiples and asset value for who knows how long. We do not expect any upside in the shares until the issues surrounding the News of The World scandal play out.
Still, while we feel betrayed by a management who we have followed for decades with admiration, the good news is we believe the company can find a way out of this mess and become something quite different. Aggressive hard heating journalism has been at the root of this company’s culture since its inception. There is nothing illegal or immoral about it. However, what happened at News International went beyond aggressive journalism and was illegal, immoral and unnecessary to the achieving the strategic goals of the company. And a damn shame!
News Corp. Impact of Scandals on Value - Google Docs