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What happened
Gannett Co. Inc. (NYSE:GCI), the publisher that owns USA Today and other news properties, saw its share price plunge 17% by the end of the trading day. Two things gave investors doubt -- falling profits in Q3, as well as rumors that a speculated acquisition won't end up happening.
So what
Gannett has suffered like many print-based news sources with the shift over the last decade to online content, regardless of their own rising digital revenue. During the quarter, revenue grew 10% year over year, but the company posted a loss of $24.2 million, or $0.21 per share, compared to a profit of $39.2 million in Q3 2015.
Gannett has been buying up other newspapers in an attempt to rebuild it's print ad revenue, and one such deal with Tronc (NASDAQ:TRNC) no longer looks promising. Bloomberg first reported today that the banks originally planning to finance the deal have since backed out.
Now what
Following the decline in sales and profit, the company said that it would cut 2% of its staff, leading to $10 million in savings, though it noted that it would try not to cut any reporters. Additionally, non-recurring after-tax costs associated with restructuring, acquisitions, and severances seemed to be a big reason for the profit loss. Excluding those, Gannett's adjusted net income was up 6%.
While the potential for cost savings and returning to profitability in the coming quarters looks good for the company, much of Gannett's recent success is clearly driven by acquisitions. These recent acquisitions have been important for Gannett -- excluding the revenue from such deals in 2016, the company's ad revenue fell 12%.
Even if the Tronc deal does end up going through, long term there will be only so many potential acquisitions targets. We'll have to see if the combined umbrella media company can make these properties all work together toward increased profits -- or just slower losses. Year to date, Gannett shares are down 43%.
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