Rivals stalk ailing EMI

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The Independent Online
THE CITY is bracing itself for another set of grim earnings from the recording company EMI on Tuesday, amid renewed speculation that the company is about to be bought.

Analysts are expecting first half pre-tax profit for EMI to fall by about a third to around pounds 58m from pounds 76m in the same period last year. The company has already warned that continuing economic problems in its main markets, including South-east Asia and Latin America, would knock about 20 per cent off its earnings for the first six months of the year.

Sales have also slowed in Europe, not helped when two of EMI's biggest acts postponed new albums until next year. EMI is not saying which artists are involved, but big name acts assigned to the label include Garth Brooks, the Verve and the Spice Girls.

EMI shares surged 17 per cent Friday, amid speculation that Rupert Murdoch's News Corporation was eyeing the company. EMI denied a report in the Los Angeles Times that senior officials from the company had met Rupert Murdoch's son James to discuss the possibility of News Corp investing in the troubled record label.

"The recorded music growth rate is slow except in the US, but EMI is only number three there," said Angela Maxwell, an analyst with Sutherlands.

Technological developments such as the recordable compact disc and music distributed over the internet, which will make pirating much easier, are also expected to cut into EMI's future profits.

News Corp is awash with cash following its sale of an 18.6 per cent stake in Fox Entertainment for $2.8bn (pounds 1.67bn). Although Rupert Murdoch has previously said he was not interested in buying a music company, News Corp recently bought Mushroom Records of Australia, and James Murdoch ran an independent label in New York before joining the family firm to take charge of its new media division.

Immediately after EMI issued its profit warning last September, the company's shares fell 15 per cent to their lowest level in six years. They have underperformed by 30 per cent since March, when the board confirmed it had been approached by an unnamed buyer. That buyer turned out to be Seagram of Canada, which subsequently broke off talks with EMI to negotiate a pounds 6.5bn offer for Polygram, the Dutch music and film company.

EMI was later in the bidding to buy Polygram Filmed Entertainment, the movie-making arm of Polygram but pulled out.

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