The Times-Picayune of New Orleans is owned by Advance Publications, which in turn is owned by the uber-rich Newhouse family. Advance announced it would cut back printing and delivery of the paper to three days a week — Wednesday, Friday and Sunday. Advance also will gut three other papers — the Birmingham News, the Press-Register of Mobile and the Huntsville Times. Advance has practice in “downsizing” papers. It made a similar move in 2009 in Ann Arbor, Michigan. The daily was cut in favor of AnnArbor.com.

The next move by the Newhouse family likely will be to take similar steps with three other big city dailies it owns — the Plain Dealer of Cleveland, the Star-Ledger of Newark and the Oregonian. In a little more than one wave of a hand, four large cities will be without dailies.

The notion that Internet versions of papers can tip the industry back toward success is a flawed. An examination of the financial results of the Washington Post Company (NYSE: WPO), the New York Times Company (NYSE: NYT), Gannett (NYSE: GCI) and deeply troubled McClatchy (NYSE: MNI) shows that online revenue remains a tiny part of overall sales. The New York Times newspaper operation announced a drop in digital sales of 2.3% last quarter. Digital advertising is now 22.5% of the group’s revenue. That is not nearly enough to stanch the sharp erosion of print ad revenue that has dropped sharply for a decade. And it is worth noting that the New York Times sites have by far the largest audience of any newspaper group in the country.

The impression that analysts who follow the industry have for now is that the biggest newspaper chains will not cut back the number of days they print their largest daily papers. Newspapers that are more than 100 years old can be maintained by plans to lower circulations and charge loyal customers more for their subscriptions. That is only a delaying tactic. Nothing can entirely offset disappearing print advertising.

It is inevitable that large dailies in more and more cities will cut the number of days that they print newspapers, except in metropolitan areas where Warren Buffett owns the properties.

Douglas A. McIntyre

The announcement is a coup for Yahoo!’s interim CEO Ross Levinsohn, although the buyout must have been in the works long before he began his job earlier this month. What Yahoo! did not say as its reported on the agreement is what it will do with the money. That will be as crucial to Yahoo!’s share price, and perhaps its future, as anything the company has done in the past year — with the possible exception of changing CEOs twice.

Yahoo!’s market cap is just short of $19 billion, so the firm certainly could offer a dividend. That will not satisfy shareholders who have concerns about the viability of the portal company over the longer term. Yahoo! could buy back close to 20% of its shares and automatically raise its earnings per share. Shareholders may not be impressed with that move. Share buybacks rarely have been a way for shareholders to gain long-term value in troubled companies.

Beyond a these traditional uses of capital to enhance shareholder value are others that are more radical. One is a special dividend. Microsoft (NASDAQ: MSFT) did this in 2004. AOL (NYSE: AOL) plans to make a similar move with the just over $1 billion it got from the license and sales of some of its patents to Microsoft. Each was part of a plan to get cash on its balance sheet to shareholders immediately. The sum per share, however, in Yahoo!’s case would be relatively modest. Yahoo! has more than 1.2 billion shares outstanding.

If none of these is the route Yahoo! takes, the board and management are left with the option of making a quick M&A deal to enhance the company’s position as a content company. Yahoo!’s weakness in social media is obvious. But the $4 billion it has left after taxes may not be enough to buy a social media firm. Twitter, for example, has a valuation of at least $8 billion, based on the last time it raised money. If Yahoo! could raise additional cash to make an offer, a bidding war would ensue. Yahoo! does not have access to the capital necessary to win an auction. There are plenty of smaller social media companies, but not many that would make Yahoo! a force in the sector.

Yahoo! could also buy a large traditional media company and try to strengthen that company’s online presence. Yahoo! has the traffic to make such a plan work. Among the corporations it could afford is Gannett (NYSE: GCI), the largest newspaper company in the United States. It has a market cap of $3 billion. But, aside from Warren Buffett of Berkshire Hathaway (NYSE: BRK-B), who can afford to own newspapers as a hobby? Not a single analyst on Wall St. believes that papers have much of a long-term future.

Yahoo! is about to have a lot of money. Along with that will be a several options for what to do with it, none of which is terribly attractive.

Douglas A. McIntyre

News came on Thursday morning that Berkshire Hathaway Inc. (NYSE: BRK-B) (NYSE: BRK-A) has reached a deal with Media General, Inc. (NYSE: MEG) to buy all of Media General’s newspapers outside of the Tampa paper.  Buffett is joining a sector that has wrecked many private equity firms looking for deals over the last decade in printed news.  The price tag is listed as $142 million in cash, but Berkshire Hathaway will simultaneously issue a $400 million term loan and a $45 million revolving credit line.

Today’s news is likely to bring a focus on other newspaper outfits around the nation.  Some companies with high concentrations in newspapers are Gannett Co., Inc. (NYSE: GCI), The McClatchy Company (NYSE: MNI), Daily Journal Corp. (NASDAQ: DJCO), A. H. Belo Corporation (NYSE: BLC), Lee Enterprises Inc. (NYSE: LEE).

Berkshire Hathaway also owns 1.7 million shares of The Washington Post Company (NYSE: WPO), although Warren Buffett does not hold a board seat any longer.  Does it beg the question, “Does this increase or decrease the value of The New York Times Company (NYSE: NYT)?”…

Media General will also issue Berkshire Hathaway ‘penny warrants’ for approximately 4.6 million Class A shares and that will give Buffett the right to buy 19.9% of Media General’s existing shares outstanding. Berkshire Hathaway also has the option to nominate a director to Media General’s board of directors.

The newspaper sale includes websites and mobile applications and these outfits have commercial printing businesses as well.  These include 63 daily and weekly titles in Virginia, North Carolina, South Carolina and Alabama.

Dare we say Buffett is back to his paper route he had as a teenager?  Mr. Buffett said, “In towns and cities where there is a strong sense of community, there is no more important institution than the local paper.  The many locales served by the newspapers we are acquiring fall firmly in this mold and we are delighted they have found a permanent home with Berkshire Hathaway.”

The move will allow Media General to focus on the broadcast television business, which accounted for some 77% of its 2011 platform cash flow in 2011.

Media General closed at $3.14 on Wednesday and its 52-week range is $1.14 to $6.84.  Its shares are indicated up about 40% around $4.75 in early indications.  With this newspaper and media outfit up so much, it may be safe to expect that other newspaper outfits could be worth more money than their battered shares indicate.

JON C. OGG

Also, keep in mind that portfolio managers Todd Combs and Ted Weschler are still new and those new positions of under $200 million $300 million are likely tied to them.

24/7 Wall St. has gone through line by line of each position to see which stocks have been bought and sold as new positions, as well as having added in whether or not the number of shares grew or shrank on each since the prior quarter. We had added some color in on some of the positions if applicable.

Be advised that the number of subsidiaries that this filing covers is 14 entities rather than 18 entities in the prior quarter. There is also a note in the 13F filing showing that the SEC has granted “Confidential Treatment” on some Berkshire stock holdings and that likely suggests that Buffett is still acquiring a position he does not want the public to know about yet. This filing does not signal the half-dozen or more European shares that Buffett said he bought so that remains an outstanding issue as well.

The value of the stock portfolio was $66,151,587,000 at the end of 2011 and this was listed as $75,300,250,000 at the end of March 2012.

American Express Co. (NYSE: AXP) was over 151.6 million shares, SAME AS last quarter.

Bank of New York Mellon Corp. (NYSE: BK) is now 5.6 million shares, HIGHER THAN the 1,793,915 shares last quarter.

CVS Caremark Corporation (NYSE: CVS) is the SAME SIZE at 7.106 million shares after having been a new holding in a recent quarter and having been raised one quarter ago.

Coca Cola Co. (NYSE: KO) was right at 200 million shares, SAME AS BEFORE.

ConocoPhillips (NYSE: COP) is roughly 29.1 million shares, roughly the SAME AS BEFORE but it is still lower than previous quarters in past reports.

Costco Wholesale (NASDAQ: COST) 4,333,363 Shares, SAME AS last quarter after having lowered it before.

Da Vita Inc. (NYSE: DVA) is now 6 million shares worth $541 million and that LARGER THAN BEFORE after having been a new position of 2.684 million shares.

DirecTV (NASDAQ: DTV) is a LARGER POSITION listed at 22.999 million worth over $1.13 billion. This one had been 20.348 million shares worth $870 million one quarter earlier and it had been a new position just two quarters ago at 4.249 million shares.

Buffett and Newspapers

Warren Buffett surprised investors when he said Berkshire Hathaway (NYSE: BRK-A) may buy more newspapers. It already owns the daily in Buffalo and recently bought the paper in Omaha, which is where his conglomerate is headquartered, for $200 million. Buffett may view newspaper ownership as an inexpensive hobby, at least inexpensive for a company the size of Berkshire Hathaway. It is just as likely that he sees a bottom in the industry. He has had a ringside view of newspapers for some time. He was an investor in the IPO of the Washington Post Company (NYSE: WPO) and sat on its board for years. Buffett also can see that revenue erosion in the industry has slowed or at some chains stopped. Cost cuts have made margins at least tolerable. Among the stocks of the largest newspaper chains, several appear to have stopped sliding. This is the case with the New York Times Company (NYSE: NYT), Gannett (NYSE: GCI) and even battered McClatchy (NYSE: MCI), which is heavily burdened with debt.

Facebook IPO Road Show

The Facebook IPO road show has begun. Based on news accounts, the most important part of the event is that CEO Mark Zuckerberg wore a hoodie, jeans and sneakers to the first large presentation to investors. The argument to set the social network company’s value at an extraordinary $96 billion must be less important. Zuckerberg and Facebook did get an early break, before their presentations even began. Stock research firms Wedbush Securities and Sterne Agee rated the shares a Buy and trumpeted Facebook’s strength — the problems of slowing growth and the lack of revenue from mobile platforms notwithstanding.

A New Lumia 900 Bug

Nokia’s (NYSE: NOK) flagship Lumia 900 had a software bug when it launched. This caused bad PR, but the problem was solved quickly. That was not the end of glitch problems. The smartphone has a second bug: its screen turns purple when its brightness is set low. The world’s second largest handset firm — which until late last year was the largest — promised to resolve the issue quickly as well. Nokia needs the product to be a success. The fortunes of the company have crumbled as Apple’s (NASDAQ: AAPL) iPhone and handsets that run Google’s (NASDAQ: GOOG) Android software have raced ahead of it in sales. The Lumia is also the first major collaboration between Nokia and its major software partner, Microsoft (NASDAQ: MSFT). Redmond has made a billion-dollar bet that Nokia’s broad distribution of handsets can push the Window mobile software into the market, where it currently has a single-digit market share.

Douglas A. McIntyre

It is just as likely that he sees a bottom in the industry. He has had a ring side view of newspapers for some time. He was an investor in the IPO of The Washington Post Company (NYSE: WPO), and sat on its board for years. Buffett can also see that revenue erosion in the industry as slowed, or at some chains, stopped. Cost cuts have made margins at least tolerable. Among the stocks of the largest newspaper chains, several appear to have stopped sliding. This is the case with The New York Times Company (NYSE: NYT), Gannett (NYSE: GCI), and even battered McClatchy (NYSE: MCI) which is heavily burdened with debt.

The Form S-3 also details a merger between Vringo and privately held Innovate/Protect Inc., an intellectual property firm that holds eight patents acquired from Lycos, one of the early entrants in the web search field. The deal is essentially a reverse merger, with Innovate/Protect shareholders eventually owning about 55% of the merged company.

Innovate/Protect filed a patent infringement lawsuit in September 2011 against Google Inc. (NASDAQ: GOOG), a division of IAC Interactive (NASDAQ: IACI), Gannett Co. Inc. (NYSE: GCI), and Target Corp. (NYSE: TGT) for infringing on two of the company’s patents. From the S-3:

The patents relate to relevance search technology that is used in the search engine industry to produce better search results, and has also become the dominant technology used in search advertising to position high-quality advertisements. Through the strategic combination with Innovate/Protect, we expect to substantially increase our intellectual property portfolio, add significant talent in technological innovation, and be positioned to potentially enhance our opportunities for revenue generation through the monetization of the combined company’s assets.

Whether or not Vringo/Innovate/Protect can prove its case remains to be seen, but it’s targeting some pretty deep pockets that might be more than willing to settle than to fight it out in court.

The full filing is available here.

Paul Ausick

Pruitt became the CEO of McClatchy in 1996. The chain took on about $2 billion in debt, a great deal of it to buy rival Knight Ridder for $4.6 billion in 2006. In 2009, it teetered close to bankruptcy. A restructuring of obligations saved it, for a while at least. McClatchy is in financial trouble again. Pruitt leaves for the AP just in time to avoid leading McClatchy as it heads toward a new crisis.

McClatchy suffered the fate of many other chains. Its revenue, adjusted for the KR deal and the sale of one of its large papers, was almost $2.6 billion in 2007. Last year, the figure fell to just over $1.3 billion. The company had a tiny profit of $54 million in 2011. But the interest expense on its long-term debt load was $139 million. McClatchy’s long-term debt is still nearly $1.6 billion. Among the firm’s risk factors, according to its 10-K, is this: “This level of debt increases the Company’s vulnerability to general adverse economic and industry conditions.”

All newspaper stocks have fallen over the past five years as the industry has struggled with costs and a decline in print advertising. That drop has not been offset by a rise in digital revenue. But the market has been more disappointed with management at McClatchy than at other large chains. Its shares are down much more sharply than those of The New York Times (NYSE: NYT) or Gannett (NYSE: GCI). Pruitt’s poor decisions have badly hurt shareholders.

The biggest surprise about Pruitt’s appointment is that the AP board should be more aware of his shortcomings than anyone else. The board includes Michael Golden of the New York Times, Katharine Weymouth of the Washington Post (NYSE: WPO) and Craig A. Dubow of Gannett.

Pruitt has decided to leave his company, and its shareholders, at a time when they are in great peril, again. After his AP appointment, Pruitt said, “The Associated Press is the most important news organization in the world and an essential force in democracy.’ That it true. As such, it deserves a better leader.

Douglas A. McIntyre

ARM Holdings PLC (NASDAQ: ARMH) Started as Overweight at Piper Jaffray.
AvalonBay Communities, Inc. (NYSE: AVB) Raised to Outperform at Credit Suisse.
Gannett Co., Inc. (NYSE: GCI) Started as Equalweight at Barclays.
Deckers Outdoor Corporation (NASDAQ: DECK) Cut to Neutral at Credit Suisse; Maintained Buy with $105 target at Canaccord Genuity.
First Solar, Inc. (NASDAQ: FSLR) Cut to Neutral at Susquehanna.
Forest Oil Corporation (NYSE: FST) Cut to Hold at Canaccord Genuity.
Monster Beverage Corporation (NASDAQ: MNST) Reiterated Conviction Buy List and raised estimates by Goldman Sachs.
Marriott International, Inc. (NYSE: MAR) Raised to Conviction Buy List at Goldman Sachs.
Nabors Industries Ltd. (NYSE: NBR) Raised to Buy with $30 target at Argus.
PolyOne Corporation (NYSE: POL) named as Value Stock of the Day at Zacks.
Red Robin Gourmet Burgers (NASDAQ: RRGB) named as Bull of the Day at Zacks.
Sunoco, Inc. (NYSE: SUN) Cut to Underperform as Bear of the Day at Zacks.
Salesforce.com (NYSE: CRM) Maintained Neutral but raised target to $145 on Credit Suisse; Raised to Buy at ThinkEquity; Reiterated Buy and raised target to $170 at Canaccord Genuity.
Target Corporation (NYSE: TGT) Raised to Buy at Jefferies.
Trina Solar Limited (NYSE: TSL) Cut to Market Perform at Wells Fargo; Cut to Negative at Susquehanna.

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American Express Co. (NYSE: AXP) was over 151.6 million shares, SAME AS last quarter.
Bank of New York Mellon Corp. (NYSE: BK) was 1,793,915 shares, SAME AS last quarter.
CVS Caremark Corporation (NYSE: CVS) is LARGER POSITION at 7.106 million shares after having been a new holding in a recent quarter.
Comdisco Holdings (NASDAQ: CDCO) was roughly 1.5 million shares, SAME AS BEFORE.
Coca Cola Co. (NYSE: KO) was right at 200 million shares, SAME AS BEFORE.
ConocoPhillips (NYSE: COP) is roughly 29.1 million shares, roughly the SAME AS BEFORE but it is still lower than previous quarters.
Costco Wholesale (NASDAQ: COST) 4,333,363 Shares, SAME AS last quarter after having lowered it before.
Da Vita Inc. (NYSE: DVA) is a NEW POSITION of 2.684 million shares worth $203 million.
DirecTV (NASDAQ: DTV) is a LARGER POSITION listed as 20.348 million shares worth $870 million; was a new position of 4.249 million shares one quarter earlier.
Dollar General Corporation (NYSE: DG) is that SAME SIZE as before at 4.497 million shares; was a new position and a grown position before.  This one of our Top Stocks for the Next Decade.
Gannett Co. (NYSE: GCI) was 1.74 million, SAME AS BEFORE but decreased in prior quarters.
General Dynamics Corporation (NYSE: GD) is a LARGER POSITION of 3.877 million shares worth $257 million after being a new position before of 3.064 million shares.
General Electric Corp. (NYSE: GE) is 7.777 million shares; SAME AS before.
GlaxoSmithKline (NYSE: GSK) 1.51 million shares, SAME AS last quarter.
Ingersoll-Rand (NYSE: IR) was 636,600; SAME AS last quarter but still way down from prior reports.
Intel Corporation (NASDAQ: INTC) is a LARGER POSITION of 11.495 million shares worth $278 million; this was a new position of 9.333 million shares last quarter.
International Business Machines Corporation (NYSE: IBM) is now 63.905 million shares worth some $11.75 billion now after having been a new position with an average cost of about $170 per share.
Johnson & Johnson (NYSE: JNJ) was a LOWER POSITION of about 29 million shares; lower than 37.4 million last quarter and way under the peak of 62 million shares at one point in prior quarters.
Kraft Foods (NYSE: KFT) was a LOWER POSITION at about 87 million shares, down from 89.7+ million last quarter and this has continued to be lightened up since the Cadbury purchase.

Exxon Mobil Corp. (NYSE: XOM) was ELIMINATED FROM THE PORTFOLIO after having been only 421,800 shares last quarter and lowered earlier.

PAGE TWO…BUFFETT HOLDINGS ‘L to Z’

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