Knight Ridder Issues 3rd Quarter Warning

By: Michael Liedtke, AP Business Writer

(AP) Newspaper publisher Knight Ridder warned Thursday that anemic advertising sales will result in a disappointing third-quarter profit.

With its revenue still slumping, Knight Ridder predicted it will make 81 cents in the quarter, below the consensus estimate of 87 cents among analysts polled by Thomson First Call.

Through the first eight months of this year, Knight Ridder said its advertising revenue had decreased by 5% from 2001’s levels. “This choppiness has persisted into September,” said Tony Ridder, the company’s CEO.

The news caused Knight Ridder’s shares to plummet $4.53 Thursday to close at $57.91 on the New York Stock Exchange.

While all forms of media have been hurt by a prolonged advertising slump, San Jose-based Knight Ridder has been among the hardest hit in the newspaper industry.

One of Knight Ridder’s biggest papers, the San Jose Mercury News, circulates in Silicon Valley, a region still reeling from a devastating reversal of fortune in the high-tech industry. After reveling in an advertising blitz during an Internet-driven boom in the late 1990s, the Mercury News is sharing in the economic misery of a readership that lives in an area with one of California’s highest unemployment rates.

Silicon Valley’s unemployment rate stood at 7.6% in August, compared to 1.3% at the end of 2000. With few businesses hiring, the Mercury‘s August revenue from its help-wanted advertising — a major money maker — dropped 46% from the same time last year.

That continued a yearlong trend at the newspaper, with the same advertising falling 68% in the first quarter and 48% in the second quarter, said industry analyst Christa Sober of Thomas Weisel Partners.

Companywide, Knight Ridder’s help-wanted revenue in August declined 23% from last year.

“Things are not getting better,” Sober said. “You could make the argument that we won’t see numbers like we saw in those boom days again for a very long time.”

With its revenue slipping, Knight Ridder last year eliminated 2,200 jobs, or about 11% of its work force, to reduce expenses.

A sharp drop in newsprint — a newspaper’s second biggest expense after labor — has helped cushion the blow from this year’s lower advertising sales. Sober estimates Knight Ridder’s newsprint expenses will be 18% lower than last year.

But low newsprint prices also hurt Knight Ridder in the third quarter, management said, because the company owns stakes in newsprint manufacturers.

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