Murdoch's withdrawal means Newsday's next owner is likely to be Cablevision Systems, barring the last-minute entry of a new suitor or a higher offer from Daily News owner Mortimer Zuckerman.
"It became uneconomical for us to continue," Teri Everett of Murdoch's News Corp. said.
A source close to talks between News Corp. and Newsday's parent, Tribune Co., confirmed that they had parted ways.
Both Murdoch and Zuckerman bid $580 million for Newsday and its subsidiaries, including the commuter paper amNewYork. But Bethpage-based Cablevision countered with a bid that was $70 million higher.
Murdoch's exit comes days after he confidently told stock market analysts and journalists that he would prevail over Cablevision "in a couple of days."
He sought to buy Newsday in order to combine its printing, distribution and other back-office operations with that of his New York Post. The combination would make the Post profitable.
Tribune chief executive Sam Zell reached a handshake agreement with Murdoch last month for Newsday. In employee meetings at other Tribune properties, Zell has praised Murdoch and said he wants to build a relationship with News Corp.
However, sources said Zell was concerned about federal regulators holding up the sale of Newsday because Murdoch already owns two newspapers and two television stations in the metropolitan area.
Spokesmen for Tribune and Cablevision declined to comment. A Zuckerman spokesman had no immediate comment.
Tribune has been looking at bids for Newsday, because the clock is ticking on about $1 billion owed this year from its $12 billion debt, most of it from Zell taking Tribune private in December.
It's not clear why Murdoch pulled out Saturday, because he's known for more than a week of Cablevision's higher offer.
