Rupert Murdoch's Dow Jones Bid Calls A Bottom On Newspaper Stocks

NEW YORK (MarketWatch) - Rupert Murdoch must be smiling right now. May 1 is known to be a revolutionary day and now he has made history of his own.

The global media mogul, who is well accustomed to shaking up the communications industry, has done it again by, essentially, declaring a bottom for newspaper stocks.

The News Corp. chief caused an uproar in the beleaguered newspaper industry on Tuesday morning when he announced a dramatic and unsolicited bid to acquire Dow Jones & Co. for $60 a share. The move sent Dow Jones' shares flying as they gained 58% immediately following a CNBC report on the bid.

On Wall Street, there has been speculation for some time that Murdoch wanted to acquire Dow Jones, as a way to enhance his international portfolio of media properties. In the United States, News Corp. is best known for owning Fox News and the New York Post. Ambitious as ever, Murdoch attracted big headlines a few months ago when he announced plans to introduce a business-news channel that would compete directly with CNBC later this year.

Dow Jones publishes The Wall Street Journal, one of the most respected properties in the entire media industry. It also owns MarketWatch and Barron's, among other assets.

In a press release, Dow Jones confirmed the News Corp. bid.

"The Board of Directors and members and trustees of the Bancroft family, who hold shares representing a majority of the Company's voting power, are evaluating the proposal," Dow Jones said. "There can be no assurance that this evaluation will lead to any transaction."

For several years, newspaper companies have groped for solutions as readers turned their attention to the Internet. Readers like the convenience, immediacy and interactive features of the Web and newspapers have been slow in responding to this seismic shift.

Many companies have turned to layoffs as a way of staying competitive in the electronic-oriented world. For instance, Tribune Co. has drawn considerable attention for its staff cuts at the Los Angeles Times.

Dow Jones, like the New York Times and the Washington Post, has been criticized by shareholder activists for maintaining a two-tier stock structure. They say it has contributed to newspaper stocks under-performing the broad market.

The New York Times and the Washington Post rose in Tuesday trading.

Newspaper companies have struggled for the past several years to make up for the loss in advertising revenue. Electronic forces ranging from Google to Craig's list have elbowed their way into the fray.

Now Murdoch is joining them.

By Jon Friedman