In today's "Heard on the Street" in the Wall Street Journal, the L.A. Times' drag on Tribune Co. fortunes is examined. Joseph T. Hallinan writes that investors for the most part still like that Tribune acquired the Times Mirror properties five years ago, but some analysts have switched over from "buy" to "hold" on Tribune stock, which sunk to a new yearly low of $38.63 a share yesterday.

The economy's swoon hammered the Los Angeles Times, the fourth-largest daily paper in the U.S., which accounts for about 27% of Tribune's publishing revenue. Circulation fell as its publisher, Mr. Puerner, slashed unprofitable circulation in remote desert towns and bumped the daily newsstand price back up to 50 cents from the quarter his price-cutting predecessor charged. Today, circulation stands at just over 902,000 copies -- about where it was in 1968.

In an interview before his departure was announced, Mr. Puerner said Tribune wanted circulation "where we think we can provide attractive results for our advertisers." But advertising, too, has fallen, with one measure down 14% since the year before the merger. The Times has blamed a shortage of Hollywood movie ads, the war in Iraq, 9/11, and a grocery-store strike. Tribune is taking steps to stoke the paper's revenue, increasing the Times' color-printing capacity last month by 33% to attract advertisers.

There is also the tax problem. In 1998, Times Mirror disposed of two publishing subsidiaries in what was thought to be a tax-free deal. The IRS objected. A federal court decision is expected by early next year and Tribune's liability could exceed $932 million. The company says a tax reserve established in 1998 now totals $246 million.

(Via Romenesko)