Just a day after former social networking behemoth MySpace announced massive cuts to its workforce, parent company News Corp has now confirmed that it is investigating its options to divest itself of the now struggling service.
The comments came as part of a wider company-wide meeting Thursday held by CEO Mike Jones, and were confirmed by a company spokesperson in an interview with Bloomberg. Among the options being considered is a merger, spin-off, or outright sale of the unit.
"The process has just started," spokesperson Rosabel Tao said. MySpace may have begun to drag on News Corp's financials overall: it is believed that the unit may have lost as much as $100 million last year alone, and executives have called losses at MySpace neither "acceptable nor sustainable."
These losses likely have a lot to do with why the social networking service let go of 47 percent of its workforce on Wednesday.
News Corp purchased MySpace in a blockbuster $500 million transaction in late 2005. At the time, it was considered to be a solid move for the news and entertainment conglomerate, and may have added as much as $12 billion to News Corp's valuation.
Such success was short lived, however. Over the next several years Facebook took off, and consumers increasingly turned to the MySpace competitor for their social networking needs.
This move led MySpace to attempt to reinvent itself by focusing on its strengths in entertainment in its redesign that launched in November, but it may be too early to judge whether the move is successful. In any case, News Corp says it has seen some uptick in users since the relaunch.
According to Bloomberg sources within the meeting, if the site is spun off, News Corp would help fund the company and its employees would be eligible for shares in the company. News Corp has also decided to appoint digital media group operations chief Jack Kennedy to handle any potential buyout offers.