The News of the World phone-hacking scandal will not be without long-term consequences for News Corp.'s businesses in both the U.S. and U.K., according to analysts from Needham & Co., who issued a strongly worded warning that the company is under attack by "powerful enemies" in both countries.
In an unusually opinionated note to investors, Laura Martina and Dan Medina downgraded News Corp. stock from "buy" to "hold" because of what they see as growing potential for political machinations against the global media giant.
The motivations are partly personal and partly ideological -- or at least political -- the Needham analysts write, characterizing the backlash following revelations of widespread phone-hacking as a "witch hunt."
"We believe Wall Street underestimates the resolve of powerful personal enemies of the Murdochs and political enemies of NWSA's conservative media outlets," they write.
They predicted that Fox News and The Wall Street Journal (both known for right-leaning editorial views) will become political lightning rods in the 2012 election season, with opponents using the phone-hacking scandal as ammunition.
For all the lurid talk of an anti-Murdoch alignment, however, the Needham note did not mention any likely participants, or even suggest where the political machinations might emanate from.
It is well-known that Murdoch (like many business tycoons) has his share of rivals in the world of business and politics, both in the U.S. and abroad. However, it will be difficult for them to connect the U.K. scandal to News Corp.'s American properties in a way that gains political traction, as these are still mostly separate from the British tabloid division.
So far, casualties on this side of the Atlantic seem to be limited to Les Hinton, publisher of WSJ from 2007-2011, who previously served as the head of News Corp.'s British newspapers. He stepped down from his WSJ post as the phone-hacking scandal gained momentum.
Nor is the trouble all political, Martina and Medina concede, also citing the high costs of settling lawsuits in the U.K., resulting from the phone-hacking scandal.
News Corp. also faces an ongoing probe by the FBI into allegations that similar phone-hacking tactics were employed by NOTW against American citizens who died in the 9/11 terrorist attacks.