Dow Jones’s False Dawn

DJ's promising future will benefit not an independent newspaper company, but News Corp. shareholders and Rupert Murdoch.

Dow Jones & Co. reported its third-quarter earnings this morning, and, really, as a shareholder, I couldn’t ask for better results.

Earnings excluding special items rose 68 percent crushing analysts’ consensus forecast by 22 percent.

But the news gets better and better. Let’s review it, with the help of The Wall Street Journal, DJ’s flagship:

Paid subscribership to That’s up 25.5 percent to 989,000, partly due to a change in how the company counts subscribers.

Dow Jones’s enterprise-media business, Factiva? That’s up, too, 6.1 percent, after adjustments.

Here’ s another promising area: Dow Jones’s indexes business, where revenue grew 29 percent. I always liked that business.

As the Journal says: “Dow Jones is shifting more resources into such businesses, which boast higher margins and growth prospects than traditional print.” So, the future is bright there.

Even print is finally improving! Yay!

In the fourth quarter, Dow Jones expects its print ad revenue trend to improve and its online ad revenue to return to 20 percent gains.

Want a cherry on top? “Newsprint costs fell by more than $10 million from the year-earlier period, to $21 million.” That’s 32 percent!

Phew. We shareholders were worried during all those years of waiting, waiting, waiting for things to turn around. But what’s the fourth quarter going to be like?

The company anticipates ending the year with an increase of more than 40 percent for its earnings per share before items; this is above the top end of original guidance of a 25 percent-to-40 percent gain.

OMG, we’re rich!

Congrats to one and all on a fine quarter. That’s what I call rowing in the same direction, chums! Special kudos must go to to CEO Rich Zannino and the board of directors led by Chairman M. Peter McPherson, who is also president of the National Association of State Universities and Land-Grant Colleges, and president emeritus, Michigan State University. Wow. Talk about relevant experience!

And a special tip of The Audit cap goes to Michael Elefante, one of the finest trust-and-estate lawyers ever to serve as director of a global media company.

What could be the bad news after such an excellent third quarter?

Only that there isn’t going to be a fourth quarter. As the world knows, Dow Jones was bought by Rupert Murdoch’s News Corp., just, apparently, as DJ’s prospects were finally improving. The deal closes soon.

By the way, The Wall Street Journal made surprisingly poor editorial decisions on a story that has a least some degree of sensitivity. The play seems awfully casual. The headline, while true, doesn’t exactly capture the story: “Dow Jones Reports 87 percent Drop
In Net Amid Year-Earlier Gain”

Having done at least my share of earnings stories at the Journal, I’m well aware of DJ’s policy of emphasizing net income over other financial metrics. It’s a good policy. That’s not what this is about. Emphasizing net doesn’t mean ignoring the larger reality.

Bloomberg’s take is just as true:

“Dow Jones Profit Falls Less Than Analysts Estimated”

The Bloomberg story includes this quote:

‘They’re getting more revenue online,’ said Edward Atorino, an analyst at Benchmark Co. in New York who rates the shares “hold” and doesn’t own them. ‘The company’s sold, so it’s really just academic.’

But it’s not academic, is it?

These positive results are a bitter pill to swallow for those of us who didn’t want the nation’s—global capitalism’s—leading independent financial watchdog to be submerged in any large media conglomerate, let alone News Corp.

Did Murdoch buy low? Who knows? Did the board, top management or Merrill Lynch & Co. and the rest of the $30 million “team” advising DJ and the family have any idea that such a rosy couple of quarters were just around the corner? Unknown.

Is it unfortunate that all these upside surprises come too late for the Bancroft family and other shareholders to make a full evaluation of the company’s prospects? Yes. Very.

Was Jim Ottaway, a major DJ shareholder and former executive and director, right in arguing that a sale wasn’t necessary?

Of course he was.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.