Dow Jones: Driving Into The Future, Looking In The Rear View Mirror (DJ)

When Peter Kann, the former Dow Jones & Company, Inc. (DJ) chief executive and his wife, the Wall Street Journal publisher Karen Elliot House, announced at the turn of the year that they would be leaving, investors breathed a sigh of relief. The company had not prospered on their watch. But the stock, which traded above $50 in early 2004, still has trouble moving above $40 on any given day.

Earnings per share in Q4 05 were up slightly, but this was due to a one-time event. Revenue for the quarter rose 10% to $482 million, but the acquisition of MarketWatch accounted for a significant portion of this improvement. And, a number of investors feel that Dow Jones overpaid for the property. The forecast for Q1 06 was not inspiring.

Looking at figures by business segment, publishing revenue was slightly better than flat. Most of this is from The Wall Street Journal. Electronic publishing was up 33%, but, again, the MarketWatch purchase fueled much of the increase. The company noted in the report that it had taken on $439 million in debt to buy MarketWatch.

One of the noteworthy issues in the earnings report was that subscriptions to WSJ.com rose very slowly from 712,000 at the end of 2004 to 768,000 at the end of 2005, and average monthly unique visitors to Dow Jones Online actually fell. Not a good sign.

Since the earnings announcement, the new management has gone through the obligatory restructuring and eliminated a few jobs. It also settled a legacy dispute with Market Data and Cantor Fitzgerald to the tune of $202 million. The company said it would take on more debt to finance the payment.

Dow Jones has clearly been caught in the sunset of the newspaper industry, which is no sin in and of itself. The real disappointment is that the company's move to capitalize on the internet and electronic deliver has been so poorly executed. One only has to look at what companies with no real financial journalism backgrounds like Microsoft (MSFT), Google (GOOG), and Yahoo! (YHOO) have done to build huge audiences in the investment and personal finance business.

Dow Jones has probably missed the opportunity. It may not be able to recover from its late and tepid attempts to reach its audience on the web. If it is not too late, it will be soon, and one hopes new management stops shuffling divisions and starts to get its head in the game.

Related:

1. More opinion and analysis of Down Jones and its stock
2. Full transcript of Dow Jones' most recent conference call
3. More analysis of newspaper stocks

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Douglas A. McIntyre is former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard when it was the 10th most visited site on the internet, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. In the past, he has served on the boards of TheStreet.com and Edgar Online.