Lehman Brothers Downgrades News Corp.

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A Lehman Brothers analyst downgraded shares of News Corp. on Monday, saying threats from digital content distribution and the company’s exposure to the newspaper business are cause for concern.

Anthony DiClemente cut News Corp. to “Equal Weight” from “Overweight” and reduced his price target to $15 per share from $26 per share in a note to investors.

DiClemente said the rise of digital distribution of film and TV content poses a threat to the company’s 20th Century Fox movie and TV segment – a threat he compared to that faced by the music industry earlier in the decade.

Meanwhile, the company’s heavy exposure to newspapers — which DiClemente estimates accounts for 20 percent of 2009 revenues — is a liability, he said, due to declining circulation and weakening advertising revenue in the broader newspaper industry.

In addition, investors remained concerned that News Corp. may use its strong balance sheet to make stock-dilutive acquisitions, he said.

DiClemente also downgraded the broader entertainment sector to “Negative” from “Neutral,” citing his concern over the effects of technological change on business models in the industry.

A News Corp. representative could not immediately be reached for comment early Monday.

On Friday, shares of New York-based News Corp. rose 12 cents to close at $14.76.


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