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DealBook: Gannett to Buy Belo TV Stations, Continuing to Diversify Holdings

June 13, 2013 by Leave a Comment

9:59 p.m. | Updated

Leisa Zigman, an anchor at KSDK, a Gannett-owned television station in St. Louis.Tim Parker for The New York TimesLeisa Zigman, an anchor at KSDK, a Gannett-owned television station in St. Louis.

Owning a big-city television station can be a good business bet, even as the sector faces formidable competition from the Internet.

But a better bet is owning 30 or 40 of them.

That is the thinking behind a surge of consolidation in local television that crested on Thursday when the Gannett Company agreed to buy the Belo Corporation for about $1.5 billion in cash. Analysts said the deal was the biggest deal in local television in more than a decade.

For Gannett, best known for owning USA Today and a batch of smaller newspapers from coast to coast, the addition of Belo will nearly double its number of stations, to 43, from 23. It is the latest step in a yearlong strategy by Gannett to diversify its media operations amid continued struggles in the print industry.

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In announcing the acquisition on Thursday morning, Gannett said that after the Belo transaction closes, revenue from digital and broadcasting operations will make up two-thirds of its earnings. Investors were thrilled; Gannett’s stock closed at $26.60 on Thursday, up 34 percent from Wednesday.

“There is doubtless more to come,” said Robin Flynn, a senior analyst with SNL Kagan. “The next round of TV station consolidation is coming fast and furious, and the larger deals are getting done faster than most people expected.”

Station owners like Gannett have several strategic reasons for wanting to grow. Along with obvious efficiencies, bigger companies tend to have more leverage when they negotiate with cable and satellite distributors over retransmission fees — the broadcast equivalent of the per-subscriber fees that cable channels receive. These fees, although a relatively new revenue source, have become vitally important to stations as they try to offset audience and advertising declines.

Gracia C. Martore, president and chief of the Gannett Company.Carlo Allegri/ReutersGracia C. Martore, president and chief of the Gannett Company.

In many cases, Gannett’s stations earn higher fees than Belo’s, and because of contractual clauses “we will be able to move them to our rates shortly after we close the transaction,” Gracia C. Martore, Gannett’s chief executive, said in an interview.

Being bigger is also better when stations negotiate with the networks that provide them with programming. Networks like CBS have been aggressive about receiving a slice of retransmission fees, something known in the industry as reverse compensation. “Scale has become much more important” in those discussions, Ms. Flynn said.

Having a presence in more markets across the country — Gannett will have 21 stations in the nation’s top 25 markets when the Belo deal closes — can also help on the advertising front. Local stations in states with competitive elections have looked particularly valuable to investors as a result of the tremendous surge in political advertising every two years.

“Even though campaigns are doing more online with digital and social media, they’re still spending a ton at the local station level to get their messages out,” said Mark Fratrik, a vice president and chief economist for BIA/Kelsey.

His company’s research found that the Belo acquisition would vault Gannett past one of its chief rivals, the Sinclair Broadcast Group, to become the No. 3 local station owner in the United States, by revenue. The No. 1 owner is News Corporation, which owns 27 stations as well as the Fox broadcast network; No. 2 is the CBS Corporation, which owns 29.

Sinclair has been on a buying spree in the last 18 months, spending a combined $2 billion on smaller groups of local stations. Executives at Sinclair have cited many of the same reasons that Ms. Martore did on Thursday.

Belo had been concentrating on the broadcast sector. In 2008, the company was separated from its newspaper properties, including The Dallas Morning News, which became a publicly traded entity known as the A.H. Belo Corporation.

News of the deal heightened interest in other media stocks on Thursday, including Sinclair, which rose nearly 13 percent, and another rival, Nexstar, which rose more than 10 percent.

Dunia A. Shive, president and chief of Belo.Belo, via Associated PressDunia A. Shive, president and chief of Belo.

Ms. Martore said Gannett was open to “other broadcast or digital opportunities,” but that the Belo case was unique. She began talking with her counterpart at Belo, Dunia A. Shive, some time ago. The two eventually concluded that a combination made sense, and began exclusive talks. Under the terms of the deal, Gannett will pay $13.75 a share in cash, 28 percent above Belo’s closing price on Wednesday. Gannett will also assume $715 million of Belo’s debt. The deal is expected to close by the end of the year.

In several cities, the combined company will own multiple television stations; in St. Louis, it will own the top two, KSDK and KMOV, which usually would violate government rules. It will avoid that by using a tactic that has become common in local television: a shared services arrangement. The affected stations formerly owned by Belo will be structured so that they will not technically count as part of Gannett, but they will share resources like satellite trucks with the Gannett stations.

The public interest group Free Press, which calls this tactic “covert consolidation,” lamented the Belo deal.

“This increasing concentration of ownership — coupled with covert consolidation that combines formerly competing newsrooms — is failing local communities,” the group said.

Article source: http://dealbook.nytimes.com/2013/06/13/gannett-to-buy-belo-for-1-5-billion/?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

Ford Sees Little Change in Net Income

October 30, 2012 by Leave a Comment

Ford, the second-largest American automaker, said Tuesday that it earned $1.63 billion in the quarter compared with $1.64 billion in the same period last year. Its global revenue dropped slightly, to $32.1 billion, down from $33.1 billion in the third quarter of 2011.

The results underscored both Ford’s success in its home market and its festering problems in Europe, where the auto market has fallen to its lowest sales levels in nearly 20 years.

Ford said its pretax profit in North America increased to $2.32 billion in the quarter from $1.55 billion a year ago. The results were driven by the introduction of new vehicles, like the Escape S.U.V., and higher transaction prices.

But its European operations floundered because of lower sales and higher incentives. Ford reported a pretax loss of $468 million in the region, compared to a pretax loss of $306 million in the third quarter last year.

Ford has now lost more than $1 billion in Europe so far this year and has said it expects its full-year loss to top $1.5 billion. Last week, the company said it would close three factories in the region and eliminate 5,700 jobs to better balance production there with shrinking demand for new vehicles.

The company’s chief executive, Alan R. Mulally, said Ford would continue to face stiff challenges in Europe as it restructures.

“While we are facing near-term challenges in Europe, we are fully committed to transforming our business in Europe by decisively matching production to demand, improve revenue through new products and a stronger brand, improve our cost efficiencies and take advantage of opportunities to profitably grow our business,” Mr. Mulally said in a statement.

Ford’s other regional operations contributed little to its bottom line during the quarter. The company said it earned $45 million in pretax profit in Asia, compared with a $43 million loss a year ago. Pretax profit in South America fell to $9 million, down from $276 million a year ago.

The healthy profit in North America reflected Ford’s dramatic turnaround in its home market since the financial crisis that crippled the American auto industry in 2008. Unlike its Detroit rivals, General Motors and Chrysler, Ford survived without a government bailout or bankruptcy filing.

Since then, Ford has revamped its product lineup to offer a broader range of smaller, more fuel-efficient models. The company said its operating profit in North America was its highest since 2000, and it forecast similar results through the remainder of the year.

“Ford’s more balanced product mix with a stronger presence in the small car segments enabled the company to operate at highly profitable levels in the North American and Asian markets, whereas the European operations continued to struggle,” said Jesse Toprak, an analyst with the auto research site TrueCar.

Ford ended the quarter with $24.1 billion in automotive cash reserves, an improvement from $20.8 billion a year ago.

The company produced 1.36 million vehicles in the third quarter, about the same number as a year ago. Ford said it will build 1.48 million cars, trucks and S.U.V.’s in the fourth quarter, an increase of 112,000 from the same period in 2011.

Article source: http://www.nytimes.com/2012/10/31/business/ford-sees-little-change-in-net-income.html?partner=rss&emc=rss

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Nokia Continues Fading in Race With Nimbler Rivals

April 21, 2011 by Leave a Comment

BERLIN — Nokia, the struggling market leader in mobile phones, said Thursday that it intended to cut costs by nearly 20 percent over three years, a move that will likely eliminate thousands of jobs as it enters an alliance with Microsoft.

The company, based in Espoo, Finland, said it planned to reduce annual operating expenses in its core devices and services business by €1 billion, or $1.46 billion, to €4.65 billion by the end of 2013.

“This reduction is expected to come from a variety of different sources and initiatives,” the company said, “including a reduction in the number of employees and normal personnel attrition, a reduction in the use of outsourced professionals, reductions in facility costs, and various improvements in efficiencies.”

Stephen Elop, the Microsoft executive whom Nokia hired to be chief executive last September, said the company would begin negotiations with its workforce in Finland and elsewhere next week. Prior to those talks, Mr. Elop said Nokia would not speculate on the number of jobs it may eventually cut.

“Speculation on the exact numbers and the timing of those numbers is best postponed until we discuss this with” worker representatives, Mr. Elop said in a conference call with financial analysts.

Some employees will be able to transition into other jobs with Nokia, Mr. Elop said, and Nokia may have new staffing needs as a result of its partnership with Microsoft. Because of those opportunities, Nokia said it would be able to guarantee employment to all of its existing workforce through this year.

Nokia also confirmed that it had signed its agreement with Microsoft to obtain the Windows operating system for Nokia’s smartphone lineup. The two companies had announced the partnership on Feb. 11. Since then, Nokia’s stock price had fallen by about a third.

The cost-cutting initiative came as Nokia lost its lead in cellphone revenue to Apple, the research firm Strategy Analytics said Thursday, according to Reuters.

Apple’s revenue from the iPhone rose to $11.9 billion in the last quarter while Nokia’s phone revenue slipped to $9.4 billion, the research firm said.

“With strong volumes and high wholesale prices, the PC vendor has successfully captured revenue leadership of the total handset market in less than four years,” an analyst, Alex Spektor, said.

Nokia also reported Thurusday that its profit fell slightly to €344 million in the first quarter from €349 million a year earlier.

Sales rose 9.2 percent to €10.4 billion, due largely to gains in Latin America and China, where Nokia’s sales rose 29 percent and 30 percent respectively. Sales in North America fell 36 percent, and sales in Europe fell 5 percent.

Mikko Ervasti, an analyst at Evli Bank, a private bank in Helsinki, said the cuts in operating expenses were needed to bring Nokia in line with its cellphone peers, like Apple, which on average spend only half or even less on research and development than Nokia.

Mr. Ervasti said the cost-cutting could translate into 6,000 fewer jobs in its cellphone R.D. workforce, or roughly 38 percent of Nokia’s total staff for mobile phones. Those employees are currently working in Finland, China, India, Germany, England, Denmark and San Diego, California.

“These cuts were needed and are in line with what the market was expecting,” Mr. Ervasti said. “This is a direct consequence of the Microsoft agreement, and Nokia’s own need to trim expenses.”

Nokia said its sales of smartphones rose 13 percent in the quarter to 24.2 million units from 21.5 million. Meanwhile, the market grew 74 percent over all during the same time, Francisco Jeronimo, an analyst with International Data Corp. in London, said.

On top of that, the average selling price fell 6 percent in the same period to €147 from €155 one year earlier, Nokia said.

The company said it sold 108.5 million cellphones of all types during the quarter, 1 percent more than a year ago. Yet its global share of the cellphone market fell to 32 percent from 34 percent a year ago, according to IDC.

Samsung, the global No. 2, raised its share to slightly more than 26 percent, IDC said.

Mr. Jeronimo said Nokia faced significant challenges as it transitions its mobile lineup away from its own Symbian operating system and towards Microsoft Windows Phone, which will take two years.

Despite the “good performance” of the new, high-end N8 handset in Europe and its mid-tier smartphones, “Nokia is still being affected by the strong Android momentum,” Mr. Jeronimo said, referring to the mobile operating system created by Google, and “by the high-end iPhone, Research In Motion, HTC and Samsung devices.”

The pressure on Nokia could increase, he added, if Nokia users defect from Symbian to rivals in the transition.

Mr. Ervast said the company’s forecast that operating profit margin for devices and services would be 6 percent to 9 percent in the second quarter was slightly better than investors had expected.

Nokia’s share price was up 3.1 percent at €6.12 in Helsinki trading.

Nokia employed 130,951 workers as of March 31, including 59,080 who work for Nokia’s cellphone business and 71,871 who work at its networks venture, Nokia Siemens Networks, and Navteq, its geographic mapping data unit.

Article source: http://feeds.nytimes.com/click.phdo?i=0a54d02230f006b94b843508513882e6

Filed Under: Business News Tagged With: , ,