Belo Finds a Short-Term Fix

Updated from 12:53 p.m. EDT

Belo Corp.'s (BLC) solution for its ailing newspaper business is hardly a cure-all, but it does buy the company more time to fix its business model.

The Dallas-based company said Monday that it will spin off its newspaper business, which includes metro broadsheets like the Dallas Morning News and the Providence Journal, in a bid to win a higher valuation on Wall Street. The move will leave Belo as a television-station operator with yearly revenue around $750 million.

Its shares recently were up more than 16% as investors salivated at the prospect of holding a pure-play broadcasting stock unfettered by newspaper woes in 2008, a year when the Olympics and a U.S. presidential election promise to be a boost for TV networks.

"Belo has good properties in good markets, and 2008 looks like an advertising bonanza for at least some broadcasters," says Ed Atorino, analyst with research firm The Benchmark Company. "Now you've got an opportunity where they can hopefully grow the broadcast business and struggle through the newspaper business until it turns the corner."

Shares of other media conglomerates also gained on Monday as investors predicted similar moves at publishers like Gannett (GCI), Media General (MEG) and E.W. Scripps (SSP). Gannett was climbing 1.2%, Media General was up 8.3% and Scripps was adding 1.7%.

"Nobody has a solution for the newspaper business today, but investors are demanding from these companies some sort of plan to deliver returns in the next three to five years, when it looks like the newspaper downturn is going to accelerate and get uglier," says Ken Doctor, analyst with Outsell Inc. "[Belo's] move gets the stock price moving, and it allows them to probably buy themselves a couple more years of less pressure."