Gannett Co., Inc. (GCI) is all set to focus on its core operations by streamlining its business as it enters 2015. The company is setting the right stage to tap the multi-platform media landscape which includes business model diversification initiatives to add revenue streams and counter any economic onslaught. Management had earlier projected revenue growth of about 16% year over year for 2014, and is now well on track with its split plan.
Gannett, which carries a Zacks Rank #3 (Hold), has decided to split its business into two separate entities, one completely focusing on Broadcasting and Digital businesses and the other, concentrating on Publishing. The bold step is similar to that of the Tribune Company that spun off its newspaper business into a publicly traded company, Tribune Publishing Company (TPUB). News Corporation (NWSA) and Time Warner Inc. (TWX) too have separated their broadcasting and digital properties from their sluggish print business.
For quite some time now, Gannett has been making endeavors to expand its presence in broadcasting and digital products with a view to lower its dependence on its soft print media business and traditional advertising. This would reduce its susceptibility to economic conditions to a great extent.
The news of Gannett taking over Cars.com underscores the same. Prior to this, the company bought six television stations of London Broadcasting Company and acquired television-station operator, Belo Corp. We believe this will transform Gannett’s business model, which was largely focused on low-margin newspapers, to a high-margin multi-media business. Management expects broadcasting revenue to increase approximately 19% on a pro forma basis for full-year 2014 over 2013, including 23% to 25% growth envisioned for the fourth quarter.
Gannett is also realigning its cost structure and streamlining operations to increase efficiencies. The company recently offloaded Gannett Healthcare Group (“GHG”) for an undisclosed amount to OnCourse Learning. The GHG buyout is quite suitable for the portfolio of OnCourse Learning, which in itself is an online education and training provider.
Gannett has been making endeavors to put itself on the growth trajectory, building momentum and broadening its reach. The company also initiated a subscription-based model and commenced Digital Marketing Services in top markets to generate new advertising and marketing revenue sources.
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