News Corp’s share price was hit hard by upset investors in Australia this morning after Rupert Murdoch sprung an earnings downgrade on the market in a teleconference.

The shares were sold down more than 20% at one stage on the news of a “mid teens” drop in profit. The shares were down $2.95 at $12.95, just after 11am, a fall of more than 18%.

They hit a new 52 week low of $12.45 in the mad morning plunge, before recovering.

That was after Murdoch revealed that News Corp had scrapped its forecast for a slight rise in earnings and was now looking at a drop in the ‘mid teens’ about what rival US Network, CBS is predicting for 2009.

Bloomberg said Murdoch blamed tumbling advertising sales for the cut.

The company had forecast a gain of 4 percent to 6 percent for the year ending next June and is retrenching in part because of fallout from the financial-market crisis. General Motors Corp., a top television advertiser, cut its spending by 50 percent in the latest quarter, Murdoch said today on a conference call.

“The revised guidance is a clear reflection of the fiscal environment,” Murdoch said. “We expect that to continue through fiscal 2009 and be very challenging to the media sector.”

I wonder how that will play in the News Ltd papers tomorrow. It was only 10 days or so ago that they were breathlessly reporting Murdoch as saying News was “cashed up” and looking for acquisitions.

Like all media companies, News Corp will need every bit of cash. Even though the company will suffer an earning drop roughly equal to that to be endured at CBS, no sign of any cut in the carrying value of its intangible assets and goodwill. CBS chopped its earnings by more than $US14.1 billion for the same reasons outlined by Murdoch today.

The slump in US advertising is going to really hurt next year. News has over $US32 billion of intangible assets and goodwill. Time for an impairment test?

But don’t look to News Ltd papers in this country for much elaboration or hard-edged commentary. They have their own problems, which were alluded to in an earlier profit statement from news Corp.

The News Ltd papers have taken great joy in reporting the downgrades and earnings problems at rival media, such as Fairfax, Ten Network, the Seven Network and PBL Media.

But in all these reports we’ve heard little in the way of updates on how the News Ltd papers and magazines were travelling. Well, now we have a hint, thanks to comments in the News Corp first quarter report, released this morning. The answer? News Ltd papers are doing it tough.

Unfortunately we have no figures, but the commentary, brief as it is, could have been written by the spin doctors at rival Fairfax.

The Newspapers and Information Services segment reported first quarter operating income of $134 million, up $41 million from the $93 million reported in the same period a year ago, as lower depreciation expense was partially offset by lower advertising revenues from the U.K. and Australia. In addition, the inclusion of Dow Jones & Company reduced the segment operating income by $4 million in the quarter.

The UK newspaper group reported an increase in operating income in local currency terms as compared with the first quarter a year ago, primarily as a result of the absence of accelerated depreciation on the decommissioned printing presses, which was partially offset by decreased advertising revenues. During the quarter, circulation revenues were in line with the first quarter of the prior year.

The Australian newspaper group reported lower first quarter operating income in local currency terms versus the first quarter of fiscal 2008 primarily due to lower classified advertising revenues resulting from declines in the employment and auto sectors. Additionally, circulation revenues decreased slightly during the quarter mainly from lower sales volume.

There’s a starling bit of news that we haven’t heard from the Holt street bunker. Circulation revenues were down “slightly” in the “quarter mainly from lower sales volumes.” So circulations were down in the quarter: we can hardly wait to see the next audit figures.

Unfortunately no figures, but there’s no doubt News Ltd’s revenues and profits are facing the same downward pressures that Fairfax papers are, and the West Australian, which also shared some gloomy first quarter figures with us yesterday

Stokes is down around $200 million or so on his WAN adventure and its clear earnings growth won’t happen there this financial year, just as they won’t at Seven where next Monday’s AGM in Sydney will be told profits are down close to 50% in the first quarter.

But the real news was the first quarter figures from News Corp, and depending on the various profit figures it issues to confuse us all, there was either a 9% drop (which will no doubt be in the News Ltd papers tomorrow) or a 30% fall.

The choices for profits were:

News Corporation today reported first quarter consolidated operating income of $953 million, a decline of 9% as compared to the $1.05 billion reported a year ago. This result reflects double-digit percentage profit increases at the Direct Broadcast Satellite Television, Cable Network Programming and Newspapers and Information Services segments, being more than offset by decreases at the Television, Filmed Entertainment and Other segments.

Or:

First quarter net income of $515 million ($0.20 per share) decreased versus net income of $732 million ($0.23 per share) reported in the first quarter a year ago. The year-on year decrease is largely driven by declines in Equity contributions from affiliates and operating profit, which were partially offset by the gain on the sale of eight television stations included in Other, net. The lower contribution from affiliates reflects the inclusion of $447 million in losses from Premiere AG, principally representing a write-down of our investment, and the absence of contributions from The DIRECTV Group, which was divested in February 2008.

Notice how in the second paragraph from the News Corp report the percentage fall isn’t given: it’s 30%, which is more headline grabbing than a 9% fall. The Rupert spin machine was in full swing yesterday, but Bloomberg wasn’t fooled this morning:

News Corp, the media company controlled by Rupert Murdoch, said fiscal first-quarter profit fell 30 percent on slumping television advertising and a shortfall from films such as “Space Chimps.”

Net income dropped to $515 million, or 20 cents a share, from $732 million, or 23 cents, a year earlier, New York-based News Corp. said today in a statement. Profit missed the 22-cent average estimate of 16 analysts. Sales rose 6.3 percent to $7.51 billion with the purchase of Dow Jones, also missing estimates.