Barron's has an editoral by Jonathan Knee, Director of the Media Program at the Columbia Business School this weekend on pages 53-54. The title of the editorial is "This Dying Medium Has Plenty of Life" and talks about the newspaper industry. I thought it was interesting piece and a good description of some of the challenges of the industry. But as he points out, even in this current environment, most newspaper operations are nicely profitable, only at a reduced operating margins to what investors have previously been used to. He said the industry at mid-teen margins currently is well off the 30%+ margins seen in the past, but that newspapers can still function nicely at these profitability levels. One quote I liked "With daily circulation under 100,000, local "monopoly" papers represent the backbone of the industry, and continue to be highly profitable - though not as profitable as they once were". Essential he is describing LEE's niche in the industry, small local markets where they currently generate margins of 20%+ in all of their markets.

Although the editorial talks about challenges for the industry, mainly from Internet rivals, the industry is still very profitable on an operating basis and he contends investors will be "well rewarded". Many on this board including myself have observed that LEE is seriously undervalued. With the recession having ended and ad revenues starting to slowly return, I believe LEE will have earnings around $1/share in fiscal 2010 and the share price will likely be 2-3 times higher than the current $3.55/share.