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News Corp. agrees to buy Photobucket, Flektor sites

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News Corp. (NYSE: NWS), owner of the MySpace online social network, agreed to buy Web site owners Photobucket Inc. and Flektor Inc. to add digital picture services that let users store, edit and share images.

Both sites will be added to News Corp.'s Fox Interactive Media unit, the New York-based company said Wednesday in a statement. News Corp. didn't disclose the price, which UBS AG analyst Michael Morris said may be as much as $300 million.

"It makes a lot of sense,'' Morris said. The two sites offer MySpace technology to upgrade its video and picture capabilities and stay current with young users. "It gives them protection against obsolescence,'' he said.

Photobucket and Flektor, along with Google Inc.'s (Nasdaq: GOOG) YouTube and Yahoo! Inc.'s (Nasdaq: YHOO) Flickr, are capitalizing on the growth of inexpensive digital cameras and high-speed Internet connections. More than 30 million people worldwide visited Photobucket's Web site in March, almost twice the number a year earlier, according to the research firm ComScore Inc.

Flektor provides users with tools to edit and arrange photos and video clips for presentation to others or for posting on blogs and other Web sites, News Corp. said in the statement. Started last year, Flektor is based in Culver City, Calif.

Social-networking sites such as MySpace and Facebook account for 75 percent to 80 percent of the links to photos on Photobucket, Chief Executive Officer Alex Welch said in an interview last month.

Seeking acquisitions

News Corp., led by Rupert Murdoch, is also trying to buy Dow Jones & Co. (NYSE: DJ), publisher of the Wall Street Journal, for $5 billion.

Last month, Photobucket accused News Corp. of blocking its users from posting videos to their pages on MySpace. Welch said in a statement at the time Photobucket wasn't dependent on users being able to link to MySpace.

Photobucket hired Lehman Brothers Holdings Inc. (NYSE: LEH) to evaluate a sale of the company last year. In May 2006, the company raised $10.5 million from Trinity Ventures and Insight Venture Partners.

News Corp. bought MySpace for $580 million in October 2005. The site had 107.7 million visitors in March, more than double a year earlier, ComScore said.

Photobucket generates most of its revenue from advertising. Users who pay a subscription fee of $25 a year get more storage for their pictures and don't have to see the ads.

"This gives News Corp. a foot in the door to get MySpace users accustomed to the pay model,'' said New York-based Morris, who rates the shares Buy and doesn't own any.

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