Q3 Profits Swoon At Dow Jones -- But Nice Gains, Too

By: E&P Staff Wall Street Journal publisher Dow Jones & Co. reported a steep fall in its third-quarter profit compared to the tax-aided earnings in 2006, but said its revenue increased 19.6% over the year-ago period as gains in its Web sites and print circulation more than offset print advertising decreases.

A Goldman Sachs report later hailed cost-cutting results and said the company exceeded its expectations in its likely final pre-Murdoch report.

Third-quarter profit plunged 87% to $12.8 million, or 16 cents per share from $105.4 million, or $1.26 a share, a year ago. The 2006 Q3 earnings benefited from the sale of six community papers. Dow Jones said excluding special charges, including third-party transaction costs related to the pending sale to Rupert Murdoch's News Corp. and higher stock-based compensation expense related to the stock's surge after the News Corp. bid, it would have earned 27 cents a share in the quarter.

Dow Jones Q3 results reflected continued troubles at the flagship Wall Street Journal.

The Journal's U.S. print advertising revenue declined 2.9% on a fall of 13.6% in ad volume. Dow Jones said the decline was mostly attributed to a sharp fall-off technology advertising revenue which more than offset increases in financial and "general" advertising.

Ad revenue for the Wall Street Journal Digital Network was up 7.8%.

Paid subscribers to The Wall Street Journal Online jumped 25.5% in the third quarter to 989,000, which Dow Jones attributed to a subscription drive and a change in how it count subscribers.

Dow Jones said it expected continued improvement in print ad revenue in the fourth quarter, by which time News Corp.'s $5.2 billion deal to take over the financial publisher should be complete.

"Based on our current outlook for the fourth quarter, where we see our print ad revenue trend improving and online ad revenue returning to 20% gains, we expect to end the year with EPS (earnings per share) before special items climbing in excess of 40%, which is above the top end of our original guidance range," CEO Rich Zannino said in a statement.

"This future will be even brighter when Dow Jones is able to leverage the successful, powerful and far-ranging talent, brands, distribution channels and other resources of News Corporation."

Dow Jones said the surge in its stock price after the disclosure of Murdoch's bid for the company allowed it to pay down more debt. It said it ended the third quarter of 2007 with $375 million in debt compared with $392 million at the end of the second quarter 2007.