Murdoch: US economy will be dismal
Royal Gazette
By Peter J Brennan
May 30, 2008

CARLSBAD, California (Bloomberg) - Rupert Murdoch, CEO of News Corp., predicted the US economy will be dismal in the coming months.

"In the next 18 months, this country is in for a very hard time," Mr. Murdoch said on Wednesday night at the D: All Things Digital conference in Carlsbad, California. "For the most part, people are suffering terribly."

Increasing gas prices are reverberating throughout the economy and unemployment will probably rise, he said. Mr. Murdoch, whose company owns the Wall Street Journal and Fox News, predicted Democratic candidates will probably win most of the races in the general election in November.

Democratic candidate Barack Obama is "like a rock star", while Republican nominee John McCain is unpredictable and has spent too many years in Congress making compromises, said Mr. Murdoch, adding he has not decided which candidate he will support.

The CEO said newspapers are going to "deteriorate tremendously", which will give the Wall Street Journal the opportunity to pick up more affluent readers throughout the US.

Newspapers will have to lower their profit margins to 10 percent from 30 percent and publish stories people "want to read" rather than articles geared toward winning Pulitzer Prizes, he said.

Earlier at the conference, Yahoo! Inc. CEO Jerry Yang said Microsoft Corp. is still discussing potential partnerships with his company after walking away from a $47.5 billion takeover bid this month.

Microsoft, the world's biggest software maker, had sought a Yahoo acquisition to bolster its Internet unit, which trails Google Inc. in the $41 billion-a-year market for online ads. Google has the dominant Internet search engine, while Yahoo and Microsoft rank second and third. Microsoft dropped its bid May 3 after Yahoo demanded a higher price.

Mr. Murdoch was "mystified" that Yahoo turned down the offer, which he called generous. Google, described by Mr. Murdoch as "the greatest company in America," could use its dominance in Internet searches and growing cash reserves to challenge Microsoft's monopoly of operating system software, he said.

"Google is so good; it's the best search engine by far," Mr. Murdoch said. "You can see why Microsoft is worried."

Yahoo has a huge job to try to maintain its market share, Mr. Murdoch said. Discussions to add News Corp.'s MySpace social network to the Yahoo portal did not work out, he said.

Billionaire Carl Icahn and other Yahoo investors have threatened to oust the company's directors if they don't make a deal with Microsoft. Yahoo's board should not be worried because Mr. Icahn is just making "noise" that will earn him around $200 million, Mr. Murdoch said, eliciting laughter from the crowd.

Yahoo, based in Sunnyvale, California, fell two cents to $27.14 at 12.24pm New York time on the Nasdaq Stock Market. The shares had climbed 17 percent this year before today. Redmond, Washington-based Microsoft, down 21 percent this year, increased 36 cents to $28.54.

News Corp., based in New York, fell 16 cents to $19.03 in New York Stock Exchange composite trading. The Wall Street Journal hosted the conference.

Original Text