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At Tribune, Help Wanted With Ads

By Jeremy MacNealy
April 13, 2006

Major League Baseball is underway, with the Chicago Cubs off to a surprisingly solid start. Media enterprise Tribune (NYSE: TRB), the team's owner, must be pleased with the Cubbies' play. But as partial owners of Tribune, will shareholders be as pleased with the company's overall latest performance? I doubt it.

The advertising environment continues to be extremely tough for the newspaper industry. Newspaper ad revenues for the first quarter were flat year over year. Retail advertising was particularly weak, as electronics and department stores reduced their exposure. Hardware and home improvement-related advertising revenues, however, showed solid strength. Given the hot real estate market, this comes as no surprise.

National advertising experienced some of the greatest declines; revenues from this segment were down 8% compared with the same period a year ago. The lack of Hollywood blockbusters may help to explain this weakness. Revenues from the auto industry also fell.

In addition to newspapers, Tribune's television, broadcasting, and entertainment segments continue to struggle. Entertainment was hit by a $13.5 million charge related to a player trade for the Cubs. I guess success on the field comes with a cost.

The interactive advertising division continues to display the greatest growth. Traffic at Tribune's websites increased 32% in the first quarter. This translated into 30% higher revenues, with classified help-wanted ads performing particularly well. According to management remarks in the conference call, the company intends to add more news video to its newspaper websites to keep online readers engaged. Online businesses like its CareerBuilder.com concept will also be emphasized going forward. Within three years, management hopes to double its exposure to the Internet, making online sales at least 12% of its total revenues.

Overall, the picture continues to look bleak. Shareholders may take some comfort in management's apparent belief that Tribune's stock is undervalued. The company repurchased $138 million worth of stock this quarter, and plans to buy back roughly $350 million for the year. But until Tribune can get its top line moving in a positive direction again, there's not enough value here to entice this particular Foolish investor.

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