Gannett Co., Inc. (GCI)

The newspaper industry is in an unenviable position. Advertisers and reader have turned their backs on newspapers. Eminent media personalities like Rupert Mudroch and Arthur Schulzberg have predicted that new media like the internet and the mobile phone will kill the newspaper. It is crunch time and all the big newspaper companies are innovating. Gannett has undertaken an initiative whereby their news rooms will be converted into information centers. This initiative will focus not only on traditional media, but new media like the internet, mobile phones and e-mail. McClatchy, recently, dropped out of an online advertising partnership with Gannett and Tribune to join a rival group of publishers. Gannett sold 4 of its US based dailies to Gatehouse for $410 million, reiterating the fact that the company is distancing itself from traditional media.





Gannett’s 2006 revenues increased 6% over last year to $8 billion. The year 2007 will, however, be marked by the absence of around $98 million in political revenue. This will severely affect comparisons in the second half of the year as the company received $89 million in political revenue in 2006’s second half. The first quarter of 2007 will also be severely affected as last years quarter had $22 million from Olympic revenues. The huge $5.2 million of debt is also a cause for some concern.





Newsprint costs are high in 2007. They are expected to decline marginally in the second half of the year. The operating costs are, however, predicted to increase modestly towards the year ahead and this will affect the company’s results. Classified advertising declines have affected ad revenues in the first few months of 2007 and the outlook for classified advertising is low throughout the year. The weak automotive advertising on television is also affecting the company’s fortunes. Consequently, we expect Gannett to have a tough year ahead.