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Less Black Ink for Newspaper Firms

By William Donald The slowing economy has cut deeply into advertising spending, and this has weighed on many newspaper publishers' revenue and growth prospects in recent quarters.

At a newspaper conference on June 18, publishers forecasted a gloomy advertising environment for the rest of the year. S&P sees softer ad demand, cost-cuts and layoffs all having an impact on most of the rest of 2001.

Some publishers tried to dispel the bad news. Dow Jones (DJ), New York Times (NYT), Knight Ridder Inc. (KRI), and Washington Post (WPO) each reaffirmed second-quarter and full-year EPS expectations as results were aided by efficiency steps. Gannett Co.'s (GCI) CEO Douglas McCorkindale says the advertising market appears close to a bottom. Additionally, newsprint prices are starting to drop, although this is a sign of the weaker ad climate.

Standard & Poors's is generally neutral on the newspaper publishing group for the short to intermediate term, given the uncertain advertising outlook, but thinks the sector is attractive for long-term value investors. S&P has a 4 STARS (accumulate) recommendation on Dow Jones.

S&P also has 3 STARS (hold) recommendations on USA Today publisher Gannett, Knight Ridder, New York Times, Tribune Co. (TRB) and Washington Post. Donald is an equity analyst following advertising and publishing stocks for Standard & Poor's

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