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Rupert Murdoch endorses Carey as next in line

By Yinka Adegoke

NEW YORK (Reuters) - Rupert Murdoch acknowledged for the first time publicly that his son James is not the preferred choice to succeed him as News Corp CEO, at least in the near-term.

In the clearest indication yet that the phone hacking scandal enveloping News Corp's U.K. operations has damaged the succession ambitions of James Murdoch, his father endorsed top lieutenant Chase Carey for the job.

"Chase is my partner and if anything happened to me I'm sure he'll get it immediately -- if I went under a bus," the elder Murdoch said in response to a question from a Reuters reporter about succession on the company's quarterly earnings call.

Although News Corp has often said that it has a succession plan in place, the company has never explicitly stated who would ascend to the CEO role should Murdoch step down.

In testimony before Parliament last month, Murdoch reiterated his long-held desire to see one of his children succeed him. Until recently, his youngest son James, 38, had been viewed as the likely successor after he was promoted to deputy chief operating officer in March.

The younger Murdoch has been under pressure since the phone hacking scandal, which erupted last month at News Corp's UK operations, forced the closure of its News of the World tabloid and the arrest of 12 ex-staffers. News Corp's UK business ultimately reported to the younger Murdoch.

James Murdoch has to submit a written statement to a British parliamentary committee by Thursday responding to accusations that he misrepresented statements in prior testimony.

But James Murdoch hasn't been completely exiled, however. Murdoch, 80, added that he and Carey had "full confidence" in James, leaving the door open for him to possibly become CEO in the future.

In the meantime, the elder Murdoch has no immediate plan to step aside despite the phone hacking scandal raising questions about his leadership. "I hope the job won't be open in the near future," Murdoch joked. He added that he has the full support of News Corp's board.

Murdoch's comments came during a quarterly earnings call in which he was more lucid about the company's operations and more combative toward inquisitors than he was last month before Parliament.

Murdoch forcefully denied allegations that News Corp's board was beholden to him rather than to shareholders and sought to drive home the notion that its independent directors were just that.

News Corp's board has been criticized in recent weeks for being crammed with family members, corporate insiders and long-time associates of Murdoch. It is often held up as prime example of weak corporate governance by experts, especially since the phone hacking scandal rocked the company.

According to Murdoch, however, "It's a very strong board, very often very critical and we have a lot of free ranging discussions."

Murdoch also beat back calls from analysts about selling or spinning off the company's newspaper operations. In addition to newspapers such as The Wall Street Journal, New York Post, and The Sun, News Corp also owns the Fox broadcast network, a stable of cable channels, the 20th Century Fox film studio and a host of other assets across the globe.

Though he struck a defiant tone, Murdoch once again expressed his regret about the phone hacking revelations. He also said that he was disappointed that the scandal forced the company to drop its bid for full control of UK satellite TV company BSkyB.

News Corp reported a profit from continuing operations of $982 million, up from $902 million a year ago.

Its net income fell to $683 million, or 26 cents a share, down from $875 million, or 33 cents a share, a year ago after recording a $254 million loss on the disposition of its troubled social networking Myspace.

The company said it expects its full year operating income to increase in fiscal year 2012 by "low to mid teens" percentage points.

Revenue rose 11 percent to $8.96 billion, helped by advertising sales and fees at Fox TV and its cable networks.

Operating income at its cable network unit rose 12 percent, helped by a 23 percent rise in advertising revenue at its domestic channels and a 30 percent rise in affiliate fees at its international cable channels. Advertising at its Fox broadcast business also rose by 7 percent.

Movie profits rose 53 percent thanks to animation hit "Rio" and home entertainment sales of "Black Swan" and "The Chronicles of Narnia."

"They were pretty good numbers," said Collins Stewart analyst Thomas Eagan.

Murdoch said the company would consider expanding its $5 billion share buyback if the stock continues to be undervalued.

(Reporting by Yinka Adegoke. Editing by Peter Lauria, Robert MacMillan and Bernard Orr)

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