The Biz Blog

If I were CEO of Gannett (a highly unlikely scenario) I would likely aim for lower profits and more investment in substantive news for both my print newspapers and their digital enterprises.

 

That said, it's bogus to juxtapose some leaked profit margins at Gannett papers for the first three quarters of 2007 -- ranging as high as 42 percent -- with this week's layoffs of an estimated 1,000 newspaper employees.

The old wisdom was that Wall Street demanded newspaper companies keep profit margins at unreasonable double-digit heights. These days it might be fairer to say the investment community just doesn't care. All but one newspaper company begins trading this week below $10 a share.

 

A check at Friday's 1 p.m. close indicated that three companies are in the $1 to $2 range: McClatchy at $1.95 per share, Media General at $1.93 and Lee at $1.04. A.H. Belo, Journal Communications and E.W Scripps were marginally better at $2.02, $2.37 and $2.93, respectively.

 

The three strongest stocks in this very weak field are New York Times Co. at $7.54, Gannett at $8.71 and Washington Post at $395.90. Washington Post has historically maintained a very high share price rather than splitting the stock to make it more easily traded. Like the rest, though, Washington Post has lost more than half its value. Three strong businesses (Kaplan education services, a cable company and local television stations) make the overall company profitable even though the newspaper is operating at roughly break-even this year.

 

That newspaper stocks have fallen still further during the last two months reflects four fundamentals: revenue losses even worse in the third quarter than earlier in the year, high debt levels, the overall weakness of the market and prospects that 2009 results will almost certainly be worse than 2008's.