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Thursday, August 31, 2006

Keeping Up With The Dow Jones

Stocks: (DJ)(NYT)(RTRSY)

Dow Jones does not seem to be able to do anything to get its stock price up. The company replaced the CEO with an aggressive manager who succeeded an executive that Wall St did not much admire. The company got itself a new CFO. And, Dow Jones is talking about selling its community newspapers, which bear little or no relationship to the company's core business of providing financial news.

Goldman Sachs still has a sell rating on the pubisher of the Wall Street Journal and owner of MarketWatch.

The Dow Jones stock has barked like a dog since 2000, the peak of the internet bubble. The stock is now down from nearly $80 then to $36. One of the things investors hate about the company is that it has been controlled for generations by the family of the company's founder. The chance that a raider could take control of the company and break it into pieces is unlikely. Jim Cramer tried when he was still managing money, and the Dow Jones management was able to fend him off.

Dow Jones' management has been considered bumbling up until recently. The old CEO, Peter Kann, was savaged in a cover story in Forbes a decade ago. The company sold its trading terminal business to Bridge Information Systems, which promptly went bankrupt. Dow Jones was left with payments to Cantor Fitzgerald which had a guaranteed payout under the deal.

Dow Jones was also fairly late to moving its products to the internet. The Wall Street Journal online is considered a success, both financially, and in terms of audience (ranking 381 for all websites in Alexa). The purchase of MarketWatch (396 in Alexa) appears to be a success, and is used to promote other Dow Jones products. But sites like the New York Times online (Alexa rank 75),Reuters (ranked 231 in Alexa), and BBC News (Alexa rank 23) still run far ahead of the Dow Jone properties in audience.

Wall St continues to be concerned with the company's exposure to the print newspaper business. The price of delivering papers is rising due to oil costs. The same is true for printing and ink. Investors remain skeptical that advertising and subscription rates can rise fast enough to cover these costs.

At $36, Dow Jones trades near the bottom of its 52-week range of $42.23/$32.55. New management will have to do more than replace a few executives and offer to sell some of its smaller newspapers to get the stock moving up again.

Douglas A. McIntyre can be reached at He does not own securities in companies that he wrties about.

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