Wednesday, July 16, 2008

Breaking: Q2 profits tumble, shares plunge anew; Dubow cites economy's 'dramatic' impact on GCI

Updated at 5:18 p.m. ET. In a much-anticipated report, Gannett just disclosed that earnings dived 36% from a year ago, on a worse-than-expected drop in revenue. Chairman and CEO Craig Dubow said the near-term outlook is grim. Flagship USA Today's sales tanked dramatically. Shares swooned to new 20-year lows.

The beleaguered company's profits sank to $232.7 million, or $1.02 a share, from $365.7 million, or $1.56 a share, a year ago. Revenue totaled $1.72 billion, down 10% from last year. Wall Street analysts had expected $1.02 a share in profits, but $1.74 billion in revenue, Yahoo Finance says.

Disappointed investors dumped Gannett shares. They traded as low as $14.70, down more than 15%, before recovering late in the morning. GCI closed at $16.57, down 4.5%, on extraordinary volume: 16.5 million shares traded vs. the 4.8 million average.

In a just-concluded conference call with stock analysts, Dubow said sharp revenue declines in June appeared to be continuing this month. "We're seeing probably more of the same," he said. And Chief Financial Officer Gracia "The Knife" Martore, who dominated the discussion, said Gannett planned to use its cash horde to look for more digital deals, such as the recent buyout of, and to further pay down debt.

"The weakening economy had a dramatic impact on our results,'' Dubow said in the earnings report. He cited "pressure on advertising demand" for the newspaper division, particularly classified advertising in "real estate-centric markets in the U.S. and in the UK."

Sharp revenue decline in June
In a separate monthly statistical report, Gannett said June revenue fell 12.1% from a year ago, amid further erosion in USA Today's results. The top-circulating paper's revenue fell 27% from June 2007 on 236 paid ad pages vs. 329 last year. The monthly tallies for the company and for USA Today were the worst so far this year. USAT's results follow a big shake-up last month in the daily's advertising sales leadership.

Amid growing pressure from big investors, Gannett this morning did not disclose any big shifts in its strategy -- such as a spinoff of the company's TV division or its digital properties, steps taken by other newspaper publishers to satisfy increasingly restive investors. Boxed in by a failing strategic plan, and a worsening U.S. economy, Dubow's options now look increasingly limited.

With about 46,000 employees, Gannett is the nation's top newspaper publisher, with USA Today and 84 community dailies in the U.S., and 17 in the United Kingdom. It also owns 23 TV stations, and scores of other businesses.

Related: Gannett joins list of newspaper victims

What big investors expect this morning

Your reactions, in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.

[Image: this morning's USA Today, Newseum]


  1. Wow ... isn't corporate reading this blog?

    Didn't corporate know they were supposed to dramatically reshape the company (like so many other struggling media companies are doing)? Didn't they realize staying the course and giving a strategic plan time to work is foolish?

    Maybe, just maybe, they realize knee-jerk reactions are not a great idea?

    Yes, total revenue came in even less than expected. But expenses were also lower than expected. So the bottom line was about where everyone expected.

    I hope investors realize Gannett is a company retooling for the long-term and that it's going to take time for the plan to work and for the general economy to improve.

    OK, blogger/whiners, rip me apart for hoping things get better.

  2. Anon @ 8:59 ...

    No need to rip you apart. Hope springs eternal, for all of us. And I'm touched by your optimistic outlook. I hope you're right, then you can laugh at us some day.

    Heck, while Congress is bailing out Freddie and Fannie - allowing their CEOs to maintain their $18 million / year salaries - maybe it'll bail out the publishing industry, too. Adding additional money, for other causes, to legislation is not unheard of.

  3. We need more target demos. Our paper only has seven right now.

  4. Hear hear i second that think we have 4 or 5 target demos here

  5. This is not a rip. More of a sigh.
    My worry as an longtime employee is that the company hasn't shown us any numbers demonstrating how this retooling is supposed to work.
    What will it cost to run the organization five years from now? Where/how will the needed revenue be generated? How many "clicks" will be required for the digital product to replace the earnings being lost by the paper product? Is it realistic to assume we can generate that kind of Web traffic? If substantial cuts in the news staff are required to bring costs/revenue in line, how will that affect our ability to attract traffic? What happens as the print products begin to lose the critical mass needed to support their infrastructure? Are there other ways to monetize our product that could help us in this transition?
    If I were an analyst, those are the types of questions I'd be asking. And I'd want specific, credible numbers, with explanations of how they were derived, rather than "We can do it!" platitudes.
    Gannett, I'm rooting for you. Your future is mine. But give me reasons to hope.

  6. RE: Chairman and CEO Craig Dubow said in a statement: "The struggling economy has put pressure on advertising demand for our publishing segment, particularly classified advertising in our real estate-centric markets in the U.S. and in the UK."
    I recently moved to another state after retiring from Gannett. I remarked to my buyer's agent that there weren't many classified ads in the real estate section of the metro newspaper even though there were tons of houses for sale. She said, "We never waste money on the newspaper anymore." The agency has a huge website, sends out targeted updates when new properties come up for sale or are reduced in price. Very buyer friendly.
    So if Gannett is hanging its hat on real estate ads, everyone is sunk.

  7. Newsosaur points out that average online ad rates have dropped 14% in the last six months, from 42 cents per thousand clicks to 36 cents.

  8. I'm listening to the call right now and am surprised Chris Saridakis is not on the call. It's only Craig and Gracia.

    Many of the questions are related to the increase in Q3 newsprint prices, expected revenue from Olympic and political advertising.

    Gracia is conspicuously in control.

  9. Same old song and dance

  10. One analyst requested for Online traffic numbers and Gracia didn't have them, but said the analyst could call Jeff Hines (sp?) and he would provide those numbers.

    This same analyst asked for Classified Venture numbers and Gracia didn't have those, either, and again asked the analyst to call Jeff.

    (She's getting paid how much?)

    Gracia, and Craig, were quick to tout the readership penetration numbers - specifically citing Phoenix and Rochester being in the high 70% range - in Gannett markets when taking into account all of its products, i.e. daily newspaper, niche publications, community publications and online.

    Neither Craig nor Gracia have the same command during these calls that Doug McCorkindale did. At least Doug and Gary knew the numbers. All of the numbers. That instilled confidence.

  11. From ...

    Gannett's Death Knell Doesn't Hit Google

    By Jim Cramer
    07/16/08 - 10:55 AM EDT

    You do not buy Gannett, you buy Google.

    Go read that statement from Gannett today. Not once do they talk about the huge transference of ads from print to the Web. Not once. The only bright spot in their whole release was the Web, but they will not recognize the secular change. It is nuts, just nuts.

    Newspapers are going away, in part because the big display ad companies, the autos and the retailers, are going away. Plus, classifieds and real estate advertising is so much more profitable online and so much better as a method to sell things that you don't need newspapers.

    So what are people doing? They are selling Google.

    You have to be kidding.

    The money is one-way here.

    Consider Procter & Gamble PG: They just brought in a new marketing officer. PG is not doing much on the Web, but that's about to change with this new guy.

    I am adamant that this change is going to occur. The irony of the problems at GCI and the stock weakness at Google is just too much to be believed! It is not a cyclical problem with advertisers, it is a secular problem of print.


  12. Jim,

    "It's future hanging in the balance"...

    "The beleaguered company's profits sank to $232.7 MILLION"...

    "Revenues totaled $1.72 billion"...

    13.5% profit, in an economy under siege. The premise of what you set out to do here was intriguing, but it might be time for some soul-searching on what you're hoping to accomplish with this blog. You're a 20+ year vet of the business - don't go all tabloid in your blog life. Investigate. Report. What other media industry ISN'T retooling right now - TV? Cable? Radio? Internet? No need for Kool-Aid - but ask Gatehouse, JRC, McClatchy, Trib, etc. how they'd view 13.5% just about now. It's a blog, everyone has an opinion, and that's fine - but as moderator, it's in your best interest for your commentary (the commentary that SPURS the discourse) to remain a bit more fact-based and balanced.

  13. This just in on market watch{32C3B869-A532-40C0-B10F-53670333CCC5}&siteid=yahoomy

  14. ANON 11:56 a.m.
    For goodness sakes! Enough with the lecture. It is a blog. Jim and the rest of us can write whatever observations we wish. He has an opinion and he used action verbs to express it. That's the kind of thing a 20-year veteran does. No soul searching required.
    13% profit might be something to cheer IF the stock price was above what ... $16? I remember when the stock was $85 and climbing ... those days are gone forever for this beleaguered company whose future is hanging in the balance.

  15. @11:56 a.m.: As I write this, Gannett's shares are now down 71% from a year ago, and the company's strategic plan is going nowhere. That's what I call beleaguered.

  16. As a Gannett employee that would like the see the company's future brighter, since my future is currently tied to the company's, I find this blog serves a good purpose. Yes, there are a lot of complaints and outright attacks on the company. But this is about the only outlet a lot of employees have right now.

    I don't see the idea of spinning off the company into different ventures as a knee-jerk reaction. It's not something you undertake on a whim, but it looks like one of the few viable options right now. Print and broadcast are going in vastly different directions right now. However, under the current all-inclusive structure, a market decline in one will affect the other. Given the sea change happening in print, broadcast would do well to be able to choose its own direction free from the financial pressures of the declining revenues of the print products. (This is not a slam against print - I work on the print side. It's just an acknowledgment of reality.)

  17. 8:59, your comment "Maybe, just maybe, they realize knee-jerk reactions are not a great idea?" is laughable. As someone who got out before this tremendous collapse -- and a 71% drop in share price is a collapse -- I can tell you that knee-jerk defines what Gannett does constantly. In the last five years I was there, we went through a new initiative every year. First it was First Five Grafs, then it was Local, Local, Local, then it was all about our readers daily lives and covering Eagle Scout ceremonies and spaghetti dinners for the ill person of the week and Pop Warner cheerleading. Local Information Center was in the works when I got out. And it's a failure as much as anything else because, like every idea Gannett had, they weren't willing to commit what it takes to really make the ideas sing. Every one of these was a desperate attempt, implemented in a hurry and often in a disorganized manner with little real understanding of why we were losing readers.

    And when I was on the street talking to those readers, I heard why they were leaving: We weren't giving them anything that gave them good reason to stay.

    Thirteen percent profits are nothing to sneeze at, but Gannett is trying to bleed the foundation -- its frontline reporters, photogs, ad sales reps, circulation managers, etc -- to boost it to levels that are no longer realistic. And in bleeding the foundation, they're slowly cutting their own throat.

  18. Anon 12:22PM

  19. I'm just curious, does anybody know the breakup value of the company? What are the newspaper, radio and TV units collectively valued at?

  20. Knee-jerk = GCI.

    News 2000
    All-American Awards (huh?)
    First Five Grafs
    Moments of Life

    What am I missing?

  21. There are several common denominators if you look at things people are complaining about, ie LIC, Pluck, DIG, Databases...there are a few people who have been involved in all of the failures to a large degree--yes, Craig and Gracia but others as well. If the company were to rid itself of the few who are making decisions without the know how to do so we would all be better off.

  22. Jeff Heinz. Investor relations.

    The question was about Careerbuilder and not Classified Ventures.

    On every call there has always been a question to which the answer was "We'll get back to you." This has been true for many, many years through many different top management duos.

  23. break up value would be equal to the stock price times number of shares. value of individual properties would depend upon who would buy them. who's got the money right now?

  24. Successful initiatives at large corporations amount to about 12%. Leaving 88% that don't succeed. So lets not bang up GCI for failed initiatives. It is very commonplace.

  25. Your are missing:
    Graduation photos
    Citizen Journalist
    Graduation photos
    Cooking shows
    Graduation photos

  26. 1:20 True. But how many keep turning to the same foolish ventures dressed up in fancy new names? The public can see the emperor is naked. Too back GCI isn't seeing reality.

  27. Others you haven't mentioned, from the Ad Side:

    3 sets of 3
    Lee Snow

  28. The list of failures is endless. The fact that they give Dubow and others these massive bonuses when the company is in a nosedive is insane. I got out, but this freefall is terrifying because I have a family member still there -- so our future is looking very shaky right now. I want to believe there's hope, but this is like watching a train derail one car at a time while the engineer blissfully charges full-steam ahead with no clue about the wreckage trailing him.

  29. The Citizen Journalist one is too funny, Westchester is notorious for asking the readers for help on breaking news stories that they miss. In the LATEST HEADLINES section of the website you will sometimes see headlines that read DID YOU SEE THE ACCIDENT AT THE SCHOOL? IF SO WE WOULD LIKE TO HEAR FROM YOU. Sounds to me like not enough feet on the local street.

  30. "Sounds to me like not enough feet on the local street."

    Bingo. That's the master strategy. Radically reduce ranks of expensive journalists, fill the space with any kind of junk they can get from non-employees. All the LIC yammer is window-dressing.

    They figure they can make money if users give them most of their raw material for free. Period.

  31. Looks like Broadcasting posted a 42% margin (free cash flow.)

    Show me a business other that the illegal drug trade that can show cash flow numbers like that in a "difficult" or "challenged" time.

    And don't say there are not bodies lying in the street. Reflect on your co-workers who are trying to find work.

  32. In the LATEST HEADLINES section of the website you will sometimes see headlines that read DID YOU SEE THE ACCIDENT AT THE SCHOOL? IF SO WE WOULD LIKE TO HEAR FROM YOU. Sounds to me like not enough feet on the local street.

    If you believe this, take the next buyout that is offered to you, because you no longer understand the business in which you purport to work.

  33. Anon 8:21 PM
    What are you trying to say?

  34. You forgot Real Life/Real News.

    What we need here is a deeply layered package of stories with Web Extra and lots of tips boxes on what it is like to be in your 40s, 50s or 60s in a crap economy while your industry commits suicide. Don't forget the video, the minority voices - one of which needs to be a minority expert. You know, Real Life/Real News it. Oh, and a charticle. And crowd sourcing, gotta get us some crowd sourcing.

  35. Not all ideas are great. But the execution can kill the best idea.

    This past week at the Press we had video training. People selected because "I think I can be Steven Spielberg" or "Hey, Charlie, wanna learn video in addition to profreading?" or "Ginnie, I like you and this may give you a pump in salary so put down that broom and go learn video."

    One week. High school students get more training. And these people are supposed to change the course of the newspaper?

  36. 1:42 a.m.: You are a moron. The one-week video training is incredibly intensive and inspiring, and one of the best staff development things Gannett has ever done. What motivates people like you to spout of about what you don't know.

  37. The video training is intensive, comprehensive and delivered in a manner in which the curriculum is easy to understand and retain. In addition, it's hands-on. Face it, we all learn by doing.

    The problem with the training is that rarely, in the weeks following, is the staff provided opportunities to apply what it has learned on a regular basis so that knowledge is retained.

    In addition, sites tend to send staff to training just to meet Corporate's quota, then delegate video duties to a select few or only the photo staff. So the idea of having reporters who can provide content in multiple mediums is in essence, wasted.

    Why? In many cases it is because staffing in the Information Centers has been slashed (or a number of positions kept "dark") to the bare bones. There barely is enough personnel to manage day-to-day relevant and breaking news.

    Gannett's model during this "transition" is flawed in that the company did not hire additional staff to provide content in new and exciting ways to prove to its readership base that it was, and is, indeed relevant.

    The CEO and Board of Directors should have had the strength to stand up to Wall Street and make the necessary investment in this transition, so that it would succeed.

    Instead, what Gannett employees and stockholders received was the tired old methodology of cutting its way to prosperity - which never works. History bears that out. Gannett's current stock price (and that of other companies, not just in the newspaper business) is proof positive.

    Knowing the current state of the industry, Gannett could have been a leader by going down fighting instead of retreating.

  38. 7/17/2008 7:52 AM, ad hominem attacks almost universally render anything you say after them as nothing more than defensive kneejerk responses.

    The original poster noted that the people were not selected because they had any basic skills or knowledge. And no matter how "incredible inspring and intensive" (sounds like a Tony Robbins seminar), it was only a week and, as pointed out, not reinforced with immediate use of the skills.

    Maybe you're too young to remember when PageMaker first hit the stands and everybody (and I mean everybody) thought because they could put pictures and word on a page they were qualified to be magazine publishers. So many cheap (not in the inexpensive sense, but cheap) publications came out and flooded the arket and died soonafter.

    Today, it's blogs and YouTube. Everyone thinks they can ceate the ultimate online e-zine and do video because they can hit the auto-focus button.


Jim says: "Proceed with caution; this is a free-for-all comment zone. I try to correct or clarify incorrect information. But I can't catch everything. Please keep your posts focused on Gannett and media-related subjects. Note that I occasionally review comments in advance, to reject inappropriate ones. And I ignore hostile posters, and recommend you do, too."

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