gci

A ways back my father did some very interesting economic research into what happened to the price of drugs when a generic entered a market previously owned only by branded drugs. His findings? The entry of generics actually caused prices of brand prescriptions to rise as people who insisted on the branded prescription were willing to pay a higher price.

I was reminded of that research in reading today about the continuing decline in circulation of the big papers. The only one that managed a circulation gain was the Wall Street Journal. The hand wringing continues over this horrible state -- but this is a sign to the papers to make lemonade rather than lemons.

Revenue at newspapers has dropped so rapidly that companies in the industry cannot cut costs, even reporters, fast enough. The trouble is that too few reporters means too little news.

Five newspapers are banding together to share news. It may be the future of keeping editorial costs down and may buy a little time for large chains like Gannett (NYSE: GCI). According toThe New York Times, "The consortium is made up of The Daily News of New York; The Star-Ledger, based in Newark; The Buffalo News; The Record, based in Hackensack, N.J.; and The Times Union of Albany." The Daily News and Star-Ledger are among the largest papers in the country.

In the News:
Major U.S. Stocks Drop to Decade Lows
As U.S. Stocks continue their downward spiral many of the most well-known name are plunging to decade or more lows. General Motors is almost at a 70-year low. Among the other companies that have fallen and not able to get up include General Electric, Harley Davidson, Alcoa, Macy's, Microsoft, Southwest Airlines, Sara Lee, News Corp. Starwood Hotels, Kodak, Gannett, Intel, Newell Rubbermaid, International Paper and more.
http://www.247wallst.com/2008/11/major-sp-stocks.html

The New Subprime: FHA-Backed Loans
The subprime wolves are back. The same people whose reckless practices triggered the global financial crisis are onto a similar scheme that could cost taxpayers tons more.
http://www.businessweek.com/magazine/content/08_48/b4110036448352.htm?chan=top+news_top+news+index+-+temp_top+story

Gannett (NASDAQ: GCI) said it would cut almost 10% of its staff. This is hardly a surprise. Newspaper ad revenue has been running down over 15% this year and that trend is expected to continue. At some papers, classified ads -- mostly real estate, employment, and autos -- are off well above 30%. The internet has eroded readership. Most of these people will not ever return as newspaper subscribers. Gannett and all its peers trade at multi-year lows.

The advertising sales problem is beginning to spread to magazines. Between the internet and the recession, the magazine business is getting pinched and pinched hard. Ad pages at many business magazines and newsweeklies are down 15% to 20% this year. In some cases, the drop is closer to 30%. As a reaction, the largest magazine publisher in the U.S., Time, Inc., a unit of Time Warner (NYSE: TWX) will cut as many as 600 people. According to The New York Times, "No magazines are scheduled to close, but some are likely to be severely cut back."

Magazines will have to do something that newspapers have not be able to. They need to move their content to the internet in a way that will pull large numbers of readers so that advertising volumes are big enough to make up for the erosion of print dollars. Since there are a huge number of content sites on the web, there is plenty of competition.

The print magazine business is dying and dying faster than many analysts thought it would. Its only life boat is the internet. A life boat only holds so many people.

Douglas A. McIntyre is an editor at 247wallst.com.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Amazon.com Inc. (NASDAQ: AMZN) reported strong Q3 results but warned of softness ahead.
• Amgen Inc. (NASDAQ: AMGN) beat earnings expectations and lifted its full-year forecast.
• AT&T Inc. (NYSE: T) Q3 results were worse than expected despite the iPhone's popularity.
• Broadcom Corp. (NASDAQ: BRCM) beat expectations but lowered its revenue guidance.
• Dice Holdings Inc. (NYSE: DHX) reported solid Q3 results despite the financial crisis.
• E*Trade Financial Corp. (NASDAQ: ETFC) widened its Q3 net loss and revenues shrank.
• Gannett Inc. (NYSE: GCI) just missed earnings estimates as advertising revenues declined.
• Hasbro Inc. (NYSE: HAS) posted solid Q3 results that topped analysts' expectations.
• Mattel Inc. (NYSE: MAT) missed Q3 earnings expectations despite popularity American Girl.
• McDonald's Corp. (NYSE: MCD) easily beat Q3 earnings estimates and lifted its dividends.
• Netflix Inc. (NASDAQ: NFLX) posted strong Q3 numbers but warned of slowing subscriber growth.
• Pfizer Inc. (NYSE: PFE) Q3 profits tripled due to cost cutting and sales of pain pill Lyrica.
• Potash Corp. of Saskatchewan (NYSE: POT) topped earnings estimates, sending shares higher.
• Reynolds American Inc. (NYSE: RAI) posted Q3 results that topped analysts' expectations.
• Sony Corp. (NYSE: SNE) slashed its earnings forecast on weakness in flat panel TVs and digital cameras.
• Telefonaktiebolaget LM Ericsson (NASDAQ: ERIC) reported better-than-expected Q3 results.
• 3M Co. (NYSE: MMM) solid Q3 results topped Wall Street expectations and it offered full-year outlook.
• VMWare Inc. (NYSE: VMW) Q3 earnings surged on strong growth in services revenue.

For more earnings highlights from this week, see Apple, Boeing, Microsoft, Yahoo!, UPS, American Express and others.

Watch for upcoming quarterly reports from Verizon (NYSE: VZ), Estée Lauder (NYSE: EL) , US Steel (NYSE: X), Aetna (NYSE: AET), Procter & Gamble (NYSE: PG), Qwest (NYSE:Q), Comcast (NASDAQ: CMCSA), Kellogg (NYSE: K), Kraft Foods (NYSE: KFT), MetLife (NYSE: MET), Moody's (NYSE: MCO), Office Depot (NYSE: ODP), Avon (NYSE: AVP), CBS (NYSE: CBS), CVS Caremark (NYSE: CVS), Sun Microsystems (NASDAQ: JAVA), Eastman Kodak (NYSE: EK), Motorola (NYSE: MOT), Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), Washington Post (NYSE: WPO).

Visit AOL Money & Finance for more earnings coverage.

We all know the Gannett (NYSE: GCI) company. It is a newspaper publisher that puts out the excellent USA Today, among others. As excellent as the USA Today might be, Gannett's stock is anything but. Gannett's Q3 earnings came in at $0.76 per share. The market was looking for a penny more. In addition, publishing ad revenue fell 18% while broadcast revenue posted an anemic gain of approximately 4%.

Gannett is positioned only for further financial pressure. The newspaper industry has had a tough time of it for years, trying to adjust to a digital age. Content on print just isn't seen in the same light as it was many years ago. Trying to get readers of newspapers to migrate to online counterparts can be very difficult. Once you're on the internet, there are a whole host of portals through which content can be filtered and accessed. Even if you were a devoted reader of USA Today before coming online, it is entirely possible that you'd ditch the brand for some other source of news, whether it be Yahoo! (NASDAQ: YHOO) or Time Warner's (NYSE: TWX) AOL. Sure, you might still find content at those sites from Gannett, but it nevertheless is a whole new competitive ballgame. And let's face it, the new generation of web-savvy youth consider print antiquated and perhaps even useless, harsh as that is to say.

Competition for ads is only going to become more intense. I'd imagine that revenues will most likely continue to be challenged for Gannett as advertisers pull back in the face of the economic storm. The 52-week high on the stock is $42.50. The 52-week low is $8.49. Friday's closing price was $9.47. No, it isn't a buy. And what's that yield I see? Are you kidding me? Almost 17%! In this case, the high yield is telling you to run far, far away from the shares. If I wanted exposure to print, I'd much rather go with a company that has a portfolio which includes better assets, such as News Corp. (NYSE: NWS). Print will always be with us. I enjoy print. But its growth prospects are questionable until new models are realized.

Disclosure: I don't own any company mentioned; positions can change at any time.

News Corp (NYSE-NWS) closed at $9.36. NWS will host its 2008 annual meeting of shareholders today in New York City. The Murdoch family controls a 30% voting block of NWS. NWS November option implied volatility of 90 is above its 26-week average of 39 according to Track Data, suggesting larger price movement.

Gannett (NYSE -GCI) closed at $10.67. GCI shares are trading at a 24-year low GCI is scheduled to report Q3 EPS on October 24. GCI November option implied volatility of 108 is above its 26-week average of 54 according to Track Data, suggesting larger risk.

New York Times (NYSE-NYT) closed at $12.53. NYT is expected to report Q3 EPS on October 23. NYT November option implied volatility of 82 is above its 26-week average of 50 according Track Data, suggesting larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

In the News:
19 Stocks That Missed the Rally
A small group of S&P 500 companies missed out on a historic stock rally which saw the largest point increases in history for the S&P 500 and the Dow. Among them were General Electric, Gannett, Sears, KB Home to name a few.
http://money.cnn.com/2008/10/13/markets/no_rally/index.htm

Retail Shakeout: Worst Is Yet to Come
Experts warn that the credit freeze combined with slumping sales - and a likely dismal Christmas season - will force out many more retailers in 2009. Among those in danger are stores in the jewelry, household appliances, furniture and restaurant sectors. Department stores, home furnishings and specialty names are most at risk of bankruptcy or store closings.
http://money.cnn.com/2008/10/13/news/economy/retail_shakeout/index.htm?postversion=2008101313

Many of the large newspaper chain purchases over the last several years have involved tremendous borrowing and the banks are at the door with eviction notices. Even the big companies in the industry are having trouble. According to The Wall Street Journal, Gannett, Inc. (NYSE:GCI) the country's largest newspaper publisher, said Wednesday it had tapped its credit line as short-term financing markets stall.

Several other chains, particularly McClatchy (NYSE:MNI) and Gatehouse (NYSE:GHS) are having crippling debt problems.

A number of media sources reported yesterday that the The Star Tribune in Minneapolis has missed a payment on its debt.

Although it is hard to imagine, some of these companies may fail and fail soon. The costs of newsprint, trucks, gas, and personnel are so great that a number of newspapers may complete shut down. Customers may wake up one morning and find the front step empty. The poor newspaper boy has lost his job.

It is a hard time when there is nothing to put in the bird cage.

Douglas A. McIntyre is an editor at 247wallst.com.

Newspaper chain Journal Register has been delisted from The New York Stock Exchange and will sell off its assets. That was an early sign that the U.S. newspaper industry was in extreme trouble.

On Tuesday, there were signs that newspapers are not just in decline. Many of the largest papers may simply fail over the next year. Huge newspaper group, McClatchy (NYSE: MNI), which bought the Knight-Ridder chain, said ad revenue was down nearly 18% in August and that it would cut 10% of its work force, about 1,200 people. McClatchy has over $2 billion in debt and it is becoming clear it will not be able to pay that off. In other words, the company is close to being insolvent and will probably end up auctioning off its properties.

If McClatchy does begin a liquidation, dozens of newspapers will be for sale. Those will be added to the ones from Journal Register, Cox and probably another large chain, Gatehouse. As the market becomes awash with properties, the value of newspapers will move down sharply. Large firms like Gannett (NYSE: GCI) can no longer take on debt to cherry pick properties and build their businesses.

An even worse sign that the end of many newspapers is around the corner is the possible closing of one of the largest properties in the U.S, the Newark Star-Ledger. According to The Wall Street Journal, "the publisher of the Star-Ledger told employees that it may have to close the newspaper in January after struggling to reach a new contract with one of its key unions." The Newhouse family owns the paper.

Newspaper failures will probably come by the dozens now. It leaves open the question of how people will get local news. Some analysts believe that the internet killed the paper industry. That will leave a big void on the information super-highway.

Douglas A. McIntyre is an editor at 24/7 Wall St.

If you are involved in the market right now and watch the volatility with swings up and down, it might be easy to forget that trading volume is very thin and that moves can be exaggerated easily. Today's numbers, with a recession in Europe and stagflation rising in the U.S., were discounted by traders looking ahead and interpreting data out on the calendar. The good news in housing is that existing houses are finally moving, but the bad news is that they are selling under replacement cost.

Here are today's unofficial closing bell levels:
DJIA 11615.93 (+82.97)
S&P500 1292.93 (+7.10)
NASDAQ 2453.67 (+25.05)
10 YR T-Note 3.892% (-0.055%)
52-Week Lows

Alcoa Inc. (NYSE: AA) is a bit of a mystery. This had very unusual call option buying seen in the stock, yet shares were down marginally on the day by less than 1% at $31.96 before the closing bell. This stock has been the subject of rumors before, so anything is possible.

Gannett Co. Inc. (NYSE: GCI) was a winner today. Shares were up 10% at $21.20 right before the close on reports that it was cutting 1,000 newspaper jobs or about 3% of its workforce.

Hansen Natural Corp. (NASDAQ: HANS) was a huge winner after Nelson Peltz' Trian Funds disclosed an ownership stake. Shares were up over 10% at $29.79 in the final minutes of the trading day, and this is up almost 40% even after poor earnings recently.

PMI Group Inc. (NYSE: PMI) was a big winner today after the company sold off Australian operations for $920 million in a capital raising effort. Shares were up almost 60% at $4.45 in the final minutes before the close.

Martha Stewart Living Omnimedia Inc. (NYSE: MSO) shares were up almost 8% at $8.80 right before the close after Jim Cramer interviewed Martha Stewart herself and said the stock is cheap at $8.00.

Back in the good 'ol days of say 2004, Gannett Co. (NYSE: GCI) was one of the few newspaper publishers Wall Street liked. Part of the reason was that many of the papers were in smaller cities such as Wilmington, Delaware, and Poughkeepsie, NY, where competition was not as great for advertisers. These days the publisher of USA Today is up the creek with the rest of the industry.

With its shares down more than 50% this year, it should come as no surprise that Gannett is joining the ranks of publishers that are laying off staff. According to a memo leaked to the unofficial Gannett blog, about 1,000 positions will be eliminated across Gannett's Community Publishing Division. Six hundred of those employees will lose their jobs, the memo says.

"Several GCI papers have already made recent job cuts, but at a higher rate: 5%," the blog says. "The division's dailies do not include USA Today, suggesting that any further reductions at Gannett's flagship could be on top of the 1,000 jobs eliminated."

Gannett investors -- who must be the few, the proud like The Marines -- must have been expecting the move. Shares of the publisher have soared 10% in the past month. About the only relief they are going to get is through a takeover by private equity companies. The publicly traded media companies have no interest in buying into an industry whose best days are behind it.

In this series, we take a look at the 25 stocks on the S&P 500 Index (SPX) that have turned in the worst performance during the past decade – what went wrong, and what happens next.

It's possible that you may have heard some rumors about the death of print media. As it turns out, they're more or less true. Not long after Al Gore invented the internet during the 2000 elections, readers began defecting from traditional print media toward internet-based alternatives. The immediacy and convenience of online publications have sucked the lifeblood -- and the ad revenue -- from traditional, more easily folded newspapers.

And, if you're looking for a company that's waist-deep in the print-periodicals business, look no further than Gannett Co. (NYSE: GCI). The Virginia-based outfit prints daily newspapers that are published around the country, spanning from USA Today to the Detroit Free Press to my own local fish-wrapper, The Cincinnati Enquirer.

What went wrong? At number 23 on our list of the S&P 500's worst 10-year laggards, GCI lost 70% of its value during the decade ended June 30, 2008. The stock peaked at $91.38 in April 2004, and its performance since then can best be described as "prolonged death throes." Sure, there were a few upbeat quarters mixed in, but the industry trend was (and is) inescapable. According to the Newspaper Association of America, circulation revenue has dropped consistently in the past five years. GCI's decline on the charts has been just as consistent; since June 2004, the stock's 10-month and 20-month moving averages have ushered the stock ever southward.

Minyanville's top dog, Todd Harrison, dares to ask in public what Wall Street types quietly consider in private. For more insight and ideas, visit www.Minyanville.com.

Yikes, Lehman downgrades Scripps (NYSE: SNI), Gannett (NYSE: GCI) pooped the bed. What the heck is happening to these paltry little rags?

Some thoughts:

• The internet is the single biggest deflationary force ever invented and the "information deflation" is in full force.
  
• Without a doubt, my bullish bent on the newspaper names was my single worst "call" of the year.
  
• The thesis was that portals will buy the papers to feed content into their pipes.
  
• That remains a viable option for some of the franchise properties, although it will seemingly happen -- if it happens -- from lower levels.
  
• I still own some GCI January calls but have quickly become lottery tickets.

R.P.

Position In GCI

As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from Alcoa (NYSE: AA) and General Electric (NYSE: GE) kicking things off last week, here's a look at what Wall Street is expecting from many of the companies scheduled to report this coming week.

Analysts surveyed by Thomson Financial are expecting the following companies to report a rise in earnings when compared to the same period of the previous year.

• Nucor Corp. (NYSE: NUE): $1.80 EPS (36.6%) on sales of $6.4 billion (+53.0%)
• Google Inc. (NASDAQ: GOOG): $4.74 EPS (24.9%) on sales of $3.9 billion (+41.6%)
• Nokia Corp. (NYSE: NOK): 56 cents EPS (23.2%) on sales of $19.9 billion (+17.8%)
• CSX Corp. (NYSE: CSX): 90 cents EPS (21.1%) on sales of $2.9 billion (+12.8%)
• Altera Corp. (NASDAQ: ALTR): 27 cents EPS (18.5%) on sales of $346.7 million (+8.4%)
• IBM (NYSE: IBM): $1.82 EPS (+17.6%) on sales of $25.9 billion (+9.0%)
• eBay Inc. (NASDAQ: EBAY): 41 cents EPS (17.1%) on sales of $2.2 billion (+18.0%)
• W.W. Grainger Inc. (NYSE: GWW): $1.46 EPS (17.1%) on sales of $1.7 billion (+8.0%)
• Microsoft Corp. (NASDAQ: MSFT): 47 cents EPS (17.0%) on sales of $15.7 billion (+17.0%)
• Honeywell International Inc. (NYSE: HON): 94 cents EPS (17.0%) on sales of $9.2 billion (+7.9%)