Dow Jones' profit boosted by a special tax gain

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NEW YORK -- Financial news publisher Dow Jones & Co. reported a 57 percent rise in third-quarter earnings Wednesday due to a tax gain. It also said it would buy the other half of the Factiva news database business that it doesn't already own from Reuters Group PLC.

The company beat Wall Street earnings estimates by a penny per share but its shares still fell as it reported mixed operating results, including a 5.9 decrease in advertising revenue at The Wall Street Journal for September.

Dow Jones, which also publishes Barron's, Dow Jones Newswires and other publications, earned $16 million, or 19 cents per share, compared with $10.2 million, or 12 cents per share, in the year-ago period

Excluding the tax gain and a severance charge, earnings slipped to $9.4 million, or 11 cents per share, from earnings excluding items of $10 million, or 12 cents per share, in the year-ago period. Analysts polled by Thomson Financial had been expecting 10 cents per share.

Dow Jones' shares fell 84 cents, or 2.4 percent, to $33.52 in midday trading on the New York Stock Exchange.

Dow Jones CEO Richard Zannino acknowledged in a conference call that the company was still facing "headwinds" due to a poor advertising climate, but noted that the Journal was continuing to diversify its advertising mix by adding more consumer-oriented advertising with its Saturday edition, which launched last year.

Lauren Rich Fine, a Merrill Lynch analyst, said Dow Jones was "controlling what they can in an otherwise challenging ad environment."

Revenue grew 4 percent to $412.4 million on improvement in all business areas except local media. The results did not include $24.3 million in revenue and $3.4 million in earnings from six Ottaway newspapers which Dow Jones plans to sell.

Dow Jones said it will buy Reuters' 50 percent stake in news database Factiva for $160 million. Most of the payment will be funded with proceeds from the sale of up to six Ottaway newspapers.

Dow Jones said it expects fourth-quarter earnings before special items and any impact from its Factiva and Ottaway transactions to be in the low to mid 40-cents-per-share range versus 41 cents per share in the prior-year period. Analysts had forecast fourth-quarter earnings of 44 cents per share.

Dow Jones also said it would spend $30 million over the next two years to increase its color printing capacity by 17 percent to 168 pages per week in order to meet the demand for color advertising.

Zannino said color advertising was very profitable for the paper, generating a premium of 30 to 35 percent over the rate for a regular black-and-white advertising page.

Separately, Reuters reported a 3.3 percent gain in third-quarter revenue on improved sales to banks and fund managers, putting the company on track to reach annual revenue growth at the top end of its forecasts.

Reuters, which is based in London, said revenues for the three months through Sept. 30 rose to ?631 million ($1.18 billion) from ?611 million in the same period last year.
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