The Education of The Washington Post

It doesn't get any easier for newspaper publishers. And while The Washington Post Co. (NYSE: WPO  ) technically has become as much a purveyor of educational programs and materials as it is a media entity, that transition hasn't helped much. The company's Kaplan educational unit managed to expand its revenues nicely, but achieved an even greater growth in expenses.

The Post today is comprised of its newspaper unit -- which includes the paper of the same name -- an educational segment made up primarily of Kaplan, a magazine publishing segment, along with broadcasting and cable operations. For the quarter, this group of subsidiaries managed to achieve 4% growth in revenues to $985.6 million, up from $948.3 million for the same quarter a year ago. 

While the education division is responsible for about 48% of total revenues, let's genuflect toward history and note first that revenues in the newspaper publishing division slid 10% in the quarter, as daily and Sunday circulation at The Washington Post newspaper deteriorated by 3.9% and 3.3%, respectively.  But if newspaper revenues only slid, operating income from the unit veritably plummeted by 53%.

Magazine publishing, including Newsweek magazine, was softer in the quarter, with an operating loss of nearly $6 million, versus less than $1 million last year. And while Kaplan's revenues grew during the quarter by 16%, its even bigger hike in expenses resulted in a 35% drop in divisional operating income. Finally, broadcasting turned in a weak quarter from an operating income perspective, while the cable group was absolutely the company's only sector to grow its contribution to total income.      

My conclusion -- dispensed to Fools previously -- is that Post management has done a very interesting thing: It's layered upon its weakening media entities a "for-profit" educational unit that may someday shoot the lights out, but I'm not holding my breath. Indeed, Post's cable segment almost certainly should be jettisoned as an outlier to the other divisions' shriveling circumstances.

So, while Washington Post's plight isn't materially different from that of Gannett (NYSE: GCI  ) or McClatchy (NYSE: MNI  ) or Belo (NYSE: BLC  ) , I fail to catch the logic behind spending Friday's closing price of $766.55 to buy even a single share of a limited voting rights stock in a deteriorating company.

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Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned. He welcomes your questions or comments. The Fool has a disclosure policy.    


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