Why Wall Street wants Gannett broken apart

From the start last year, I expected Gannett Blog to run just two or three years. Here's why: I'm not sure the company will be around much longer in its current form if big investors get their way.

Wall Street analysts are pushing management to divide the company at least in two, following the example of newspaper publishers E.W. Scripps and Belo. Analysts believe that separating Gannett's faster-growing businesses from no-growth ones will create additional overall value. The sum of the parts, this thinking goes, is greater than the whole. Translation: ka-ching!

So, imagine Gannett in the future as two publicly traded companies, each with their own management, boards of directors and stock:

• ElmiraDigital Co. Inc. (A name created in a nod to history.) This new company would own Gannett's Captivate Network, Point Roll, possibly the 23 TV stations, plus GCI's stakes in CareerBuilder and Topix.net. Gannett CEO Craig Dubow might want to be chief because Elmira would promise the biggest growth and profit potential. Plus, Dubow came into the CEO's job from running the TV division. On the downside for Dubow: running a much smaller operation, since revenue and employment would be smaller than the former GCI's. Question: Has anyone claimed the ELDC ticker on the NASDAQ exchange?
• Gannett Newspapers Co. Inc. This would send GCI's papers to journalism's equivalent of a nursing home. The papers and their websites would be kept on life support. But they wouldn't get much nourishment in the form of new investments. Newspaper Division President Sue Clark-Johnson could be CEO. It would employ most of the nearly 50,000 who now work for GCI. Trades under the old GCI ticker. And at least in the beginning, it would have the most revenue. But we all know how nursing home stays end.

Who would own these companies? Gannett's board could create ElmiraDigital as a spinoff, giving shares to current stockholders. Investors would then own stock in two companies -- one, Elmira, nimble and growing quickly with shares poised to gain. The second, the remains of the old GCI -- a source of dividend income but little or no appreciation in share price.

What's the timetable? Dubow told analysts in October that a breakup wasn't in the works. Disappointed investors dumped GCI shares, which fell 5.6% over the next two days. Since that October analysts' call, Gannett stock has plunged 16%. How long management holds to its current strategy depends on how much more the stock falls.

[Image: traders on the floor of the New York Stock Exchange]