News Corp's quarterly profit beat expectations thanks to the 3-D blockbuster Avatar and strong cable networks, but the media conglomerate's shares fell 4 percent after its outlook disappointed some investors.

The Rupert Murdoch-controlled company said its operating income would dip in the June quarter as it will release fewer films compared with the year-ago quarter. It also expects higher programing costs and lower network revenue at Fox Broadcasting.

News Corp did raise its fiscal 2010 operating income growth forecast to the high 20s percentage points from its previous estimate of low 20-percent range, but some investors were hoping for an even bigger increase, analysts said.

This was perhaps less than what investors were looking for based on the initial results and expectations, said David Joyce, an analyst at Miller Tabak.

News Corp is home to Fox broadcast and cable networks, the Twentieth Century Fox movie studios and newspapers including The Wall Street Journal and The Sun.

Net income was $839 million, or 32 cents a share, for its fiscal third quarter ended March 31, while revenue grew 19 percent to $8.8 billion. Analysts had on average been expecting profit of 23 cents a share on revenue of $8.2 billion, according to Thomson Reuters I/B/E/S.

On a call with analysts, Murdoch was positive about the prospects of his company, saying the recovery in advertising sales has been strong across the board and especially in the United States and the United Kingdom.

While he was bullish on the future of the business, he cautioned investors against expecting another record-breaking Avatar -- the biggest movie of all time -- in fiscal 2011.

We have, as a matter of fact, a great slate of films coming up, but we don't have an 'Avatar' in there, said Murdoch.

But that will be more than compensated for by the outstanding growth that's guaranteed in our cable channels.

News Corp's cable networks unit reported a 38 percent rise in operating income to $588 million on strong performances from Fox News and regional sports networks among others.


Operating income at the company's filmed entertainment unit jumped 76 percent to $497 million. Avatar's strong DVD sales in the current quarter had previously prompted some analysts to raise their full-year forecasts for News Corp.

The quarter was really impressive. Film was expected to be the standout, but it was even stronger than expected and blew out the Street's numbers, said Tuna Amobi, equity analyst at Standard & Poor's.

Costs cuts and an advertising rebound at the Wall Street Journal and News Corp's British papers pushed its newspaper operating profit up more than fourfold to $131 million.

News Corp shares have risen 12 percent since the start of the year, benefiting from the wider advertising recovery like other major media companies.

Investors have been betting on an advertising-driven recovery at major media companies with the first signs of recovering ad sales from Viacom Inc last week. Viacom posted its first advertising sales rise since the second quarter of 2008 and its shares are up 16 percent so far this year.

News Corp has performed in line with the S&P Movies & Entertainment Index which is up 13 percent so far this year. Wall Street analysts expect a similarly strong ad recovery at Time Warner Inc, which reports on Wednesday and Walt Disney Co when it reports next week.

The positive results from News Corp's film and cable networks were partly offset by higher operating losses at its digital media group, which includes online social network MySpace, and its satellite TV business in Italy, Sky Italia.

Murdoch has led a media industry drive to ensure that they are paid for their programing content in all formats and platforms, from broadcast television to newspapers on the Web and portable gadgets like Amazon's Kindle or Apple's iPad.

He said News Corp was in final discussions with a number of publishers, device makers and technology companies for an innovative subscription model that will deliver content to consumers to be announced in 3 to 4 weeks. But he declined to give further details.

The stock fell to $14.76 in extended trading from their Nasdaq close of $15.40.

(Reporting by Yinka Adegoke; editing by Andre Grenon and Tiffany Wu, Phil Berlowitz)