Oct. 17 (Bloomberg) -- Gannett Co., the largest U.S. newspaper publisher, said third-quarter profit fell 10 percent as classified advertising sales and television revenue dropped.

Net income declined to $234 million, or $1.01 a share, from $261.4 million, or $1.11 a share, a year earlier, McLean, Virginia-based Gannett said today in a statement. Earnings per share beat the $1 average of 11 analysts' estimates compiled by Bloomberg. Sales dropped 3.8 percent to $1.81 billion.

Gannett, owner of USA Today, reported a 5.6 percent drop in ad sales at its newspapers as collapsing demand for housing cut listings for properties in Florida and the U.S. West. The decline wasn't as steep as McClatchy Co. reported yesterday because Gannett's focus on small markets leaves it less exposed to competition from the Internet.

``For all the doomsday predictions for newspapers, Gannett's results were pretty good,'' said Jim Peters, an equity analyst at Standard & Poor's in New York, who rates the shares ``buy'' and doesn't own any. ``As long as they continue to control costs, they'll be in a good position as the real estate market improves in most of the states where they operate.''

Shares of Gannett, owner of 85 daily newspapers in the U.S. and 23 TV stations, gained 5 cents to $43.55 at 4:02 p.m. in New York Stock Exchange composite trading. The stock, trading at a 10-year low, has declined 28 percent this year.

No Plans for Split

Gannett has no plans to split its newspaper group from its broadcast division, Chief Executive Officer Craig Dubow said on a conference call. Belo Corp., owner of the Dallas Morning News and 20 local television stations, announced plans Oct. 1 to spin off its newspaper group. E.W. Scripps Co. will split its cable- TV and online businesses from publishing and local television, the company said yesterday.

``Two-thirds of Belo is on the television side, so it makes sense for them, but we're just the opposite,'' Dubow said. ``Our position on this has not changed.'' Newspaper revenue accounted for 83 percent of Gannett's sales in the third quarter.

Newspaper ad revenue fell to $1.19 billion as classifieds dropped 7.7 percent in the third quarter. Ad sales at USA Today, the largest U.S. newspaper by circulation, declined 6.6 percent.

Gannett's newspaper ad sales were hardest hit in California, Arizona, Florida and Nevada, states where the housing market decline has been most severe, said Chief Financial Officer Gracia Martore. The four states accounted for 24 percent of newspaper ad revenue in the third quarter and 43 percent of the decline from the year-earlier period.

Broadcast Unit

Broadcasting revenue dropped 3.4 percent in the quarter to $189.5 million as Gannett sold less political advertising than a year ago. The broadcast unit includes stations in Atlanta and Denver, acquired a year ago.

Ad sales at Gannett's U.K. division Newsquest, owner of 18 daily newspapers, declined less than 1 percent, the company said.

Revenue at CareerBuilder.com, the employment Web site owned 41 percent by Gannett, was $200 million, a 17 percent increase from a year ago, Martore said. Tribune Co., McClatchy Co. and Microsoft Corp. also own stakes in CareerBuilder.

Gannett sold four newspapers to Gatehouse Media Inc. for $410 million in May.

McClatchy, the publisher of 31 daily newspapers including the Miami Herald, said yesterday third-quarter profit fell 55 percent as slumping U.S. home sales cut real estate advertising. McClatchy's stock fell to its lowest since 1996 yesterday. It declined an additional 98 cents to $17.94 at 1:27 p.m.

(Gannett held a conference call today to discuss results. For a replay dial +1-888-203-1112 and cite pass code 5648834.)

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net.

Last Updated: October 17, 2007 16:21 EDT