• by April 4, 2002

The nation's newspaper publishers continue to be besieged by sluggish advertising revenue, but the rate of loss so prevalent for the last year or so appears to be narrowing. If true, the dynamic will no doubt prompt many in the sector to predict that better times are on the way.

While results will certainly not match those of a soaring 2000, "things are definitely on the upswing," says Dresdner Kleinwort Wasserstein publishing analyst Ed Atorino.

"Newsprint is still down 20% year over year. Costs are still down, advertising is coming back. TV is leading the pack, but I think newspapers will be there." The first quarter, he believes, will not be as bad as the fourth quarter. He expects publishers that own television stations or smaller, community newspapers to fare better than those who depend more heavily on national print advertising.

The proof is in the figures that the publishers release each month. At Knight Ridder Inc., the nation's second-largest publisher of newspapers, for example, total advertising revenue in February fell 7.5%, compared with a 13% drop in January. At McClatchy Co., owner of newspapers including the Sacramento Bee and the News & Observer of Raleigh, N.C. , retail advertising in February rose 2.2%. In the previous month, it fell by 4%.

Overall, says Deutsche Bank Securities newspaper analyst Peter Appert, February advertising should be down about 5%, compared with 10% in January.

To be certain, the publishers have yet to find truly safe ground - but their foundations are starting to solidify. "February is definitely better than expected, and an early Easter is likely to help March," says Lauren Rich Fine, who follows the sector for Merrill Lynch & Co . Still, she adds, it's "too soon to say whether there is a follow-through to the second quarter, but I am hopeful."

Most newspaper publishers are likely to post earnings figures at the high end of investor expectations, and most should show a year-over-year increase in earnings per share.