Despite Scandal, Analyst Says Rupert Murdoch Will Control News Corp Destiny

July 20,2011—, 2011 -- A foam pie-slinging Parliament hearing, accusations of nepotism, speculation about a CEO shakeup and a phone hacking scandal won't sink News Corp. stock if the market is any indication.

Rupert Murdoch's testimony to the U.K. parliament Tuesday "clearly saved the stock," wrote David Joyce, a media analyst at Miller Tabak & Co, in a statement to ABC News.

Murdoch told parliament the phone hacking probe was the "most humble day of my life." But he also said that the scandal was not his fault -- he placed the blame on people within the company that he trusted, and the people they hired.

"We have broken our trust with our readers," Murdoch said during his morning testimony.

The patriarch of the Murdoch family ran an ad over the weekend apologizing for "serious wrongdoing." The 80-year-old promised to take "concrete steps to resolve these issues and make amends for the damage they have caused."

Will that be enough?

"By Rupert not taking responsibility per se but offering harsh words for the activism and vigilance against any further," Joyce said. "Also, his age showed, and a succession plan with Chase Carey possibly becoming CEO helped the stock."

According to media reports, there is speculation that COO Chasey Carey could take the reins from Murdoch as chief executive officer at the media company. But Thomas Perkins, a News Corp. board member, told The Associated Press that Murdoch and top management had the board's full support.

"People expect that this might give shareholders that are not Rupert Murdoch the ability to have some say in the company or the ability to change things or that the stock performance is going to have any say in the way Murdoch runs the company. People are fooling themselves," said Malcolm Polley of Stewart Capital. "Even if he gives up the CEO position, the reality is Rupert Murdoch is still going to control the destiny of News Corp."

In a turnaround, the company's stock price regained some of its value, closing at $15.94 Tuesday. The stock has fallen nearly 11 percent since the end of June, compared with a decline of less than 0.5 percent for the S&P 500 index in the same period, according to the AP.

The "recent developments materially increase the reputational, management, litigation, and other risks currently faced by News Corp. and its subsidiaries" led the S&P to place the company on CreditWatch for negative implications, according to an S&P analyst.

"We see the risk that, if evidence arises sufficient to bring a criminal charge against the company or any current or former employee of the company, then prosecuting authorities in the U.S. could proceed with those charges," Standard & Poors' Michael Altberg said.

The company is considered undervalued by Morningstar, an investment research firm, which rates the media conglomerate three out of five stars.

"Based on all these headlines, it's no surprise the shares are bouncing around more than normal, just given the headlines and hearings in the UK," said Michael Corty, an analyst for the research company. "We think the shares are worth $17.

"Our investment view is that News Corp. has competitive advantages due to two very strong businesses: cable networks and film/entertainment studio, which generate 75 percent of the cash flow," he said. "The strength of those businesses makes us think News Corp. has a competitive advantage in media and the stock is slightly undervalued."

The media company rallied today following a downward spiral that began after the closure of the 168-year-old publication News of the World following scandal.

"I think someone is going to have to be sacrificed. Does it have to Rupert Murdoch? Not necessarily. The company can and will exist in whatever role Rupert Murdoch has in the company," Polley said. "People involved in [News of the World] are gone."

A former News Corp. executive told ABC News that News America has paid "significantly over" $655 million since 2009 to settle cases in the United States over corporate espionage (i.e. hacking) as well as anticompetitive, antitrust behavior and disparagement of competitors' claims, as reported in the New York Times.

According to the News Corp. executive, the company paid $29.5 million to Floorgraphics in New Jersey; a $500 million settlement and a 10-year business deal to Valassis in Michigan; and a $125 million settlement to Insignia in Minnesota, including a 10-year business deal.

Investors File Suit Against News Corp.

In the United States, the phone hacking scandal and purchase of Shine Group Ltd has angered investors such as Amalgamated Bank and the Central Laborers Pension Fund, which filed a lawsuit in March alleging an "unlawful plan and scheme of Rupert Murdoch ... to use £415 million ($675 million) of News Corp's cash to buy Shine Group Ltd. ("Shine"), the television and film production company run and majority-owned by his daughter Elisabeth Murdoch."

The March suit alleges the business transaction was an attempt to bring Elisabeth Murdoch into the family business.

"Once the prodigal daughter is back into the News Corp fold, she will vie with her brothers, board members James Murdoch and Lachlan Murdoch, for the position of successor to Rupert Murdoch's global media dynasty. In short, Murdoch is causing News Corp to pay $675 million for nepotism," the suit claims.

In an amended lawsuit filed July 8, shareholders accuse Murdoch of funding his own pet projects at the expense of the company. The lawsuit claims the board of directors at News Corp failed to properly investigate the now former News of the World editor Rebekah Brooks, who was arrested over the weekend in connection to the phone hacking scandal.

"The most recently revealed manifestation of the board's utter capitulation to the control and domination of Murdoch is their complete failure to oversee the news gathering practices carried out under the watch of Murdoch's close friends, confidantes, and staunch supporters, Rebekah Brooks and Andy Coulson, both of whom served as the chief editors of News Of The World, News Corp's premier UK newspaper," the lawsuit alleges.

Amalgamated Bank had no comment.

"News Corp. suffers from the same problem as many old news companies, which is how do you monetize your content," Polley said. "The big problem News Corp. has and continues to have is what on earth is he [Rupert] trying to do."

The Future of News Corp.

"Another BSY [British Sky Broadcasting] attempt could come later. It would be possible for a newspaper group spinout to the family to be a large potential positive," Joyce said, referring to News Corp.'s aborted bid for the broadcaster.

"While we think today's hearings broadly represent a positive data point for NWSA, we'd also have to acknowledge that in light of potentially ongoing investigations, headline risk is still very real, in connection with the stock," David Bank, an analyst for RBC Capital Markets wrote. "It wouldn't surprise us to see more volatility in the stock over the coming weeks."

No one knows the company's strategy, said one analyst. "It's in Rupert Murdoch's head."

"You can make a case for being undervalued, but will the company ever realize its value? Possibly no," Polley said. "It has lovely franchises -- the Wall Street Journal is one. But, what is it going to do with them, what is he going to do with them? Other than wanting to control the widest swatch of media available, I don't know what his strategy is."

ABCNews' Lauren Pearle contributed to this report