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Publisher of San Jose Paper Quits to Protest Staff Layoffs

Media: In resignation message to employees of the Mercury News, Jay Harris suggests that profit targets of parent company Knight Ridder are unrealistic.

March 20, 2001|KAREN KAPLAN and DAVE WILSON | TIMES STAFF WRITERS

Silicon Valley's economic slowdown claimed a high-profile figure Monday as San Jose Mercury News Publisher Jay Harris resigned in protest over plans to lay off employees to meet Wall Street profit targets.

In an e-mail to newsroom employees, Harris, 52, said he hoped his departure would cause the paper's parent company, Knight Ridder Inc., to " 'closely examine the wisdom' of the profit targets we've been struggling to find a way to meet."

Harris' resignation came as Knight Ridder, the second-largest U.S. newspaper company, said it expects first-quarter earnings to fall 15 cents to 20 cents per share. Analysts surveyed by First Call/Thomson Financial had expected Knight Ridder, based in San Jose, to earn 71 cents a share, down from 74 cents in the period a year ago.

Other newspaper publishers have warned of lower profits in the first quarter because of a slowdown in advertising revenues, including Dow Jones & Co., publisher of the Wall Street Journal, and New York Times Co.

Two weeks ago, Harris warned employees that the slumping economy and the sputtering high-tech sector that fuels Silicon Valley had made a serious dent in the paper's advertising revenue and that layoffs were planned. The paper has 1,700 employees.

Harris, who had been publisher for seven years, said he urged Knight Ridder Chief Executive Tony Ridder on Monday to reconsider such drastic cuts, warning that they would risk "significant and lasting harm to the Mercury News."

"It's a big loss to the company," said John Morton, an independent newspaper analyst with Morton Research in Silver Spring, Md. "Jay has been a rising star at the company for a long time. He's also one of the most prominent black executives" in the newspaper industry.

Harris declined to comment on his resignation.

Knight Ridder's stock was off $1.13 to close at $54.36 on Monday on the New York Stock Exchange.

The company publishes 31 daily papers, including the Miami Herald, Philadelphia Inquirer and Detroit Free Press. Knight Ridder said ad revenue last month fell 2.7% compared with February 2000, mainly because of lower sales in Philadelphia, San Jose and Detroit.

Knight Ridder warned Wall Street on Monday that its "revenue environment continues to deteriorate, and we do not see relief in March."

"There's been a great deal of pressure to improve profitability since Tony Ridder took over," Morton said of Knight Ridder.

Morton estimates Knight Ridder's 2000 profit margins at 20.8%, just under the industrywide average of 21.7%. Competitor Gannett Co. had profit margins of 28% last year, he said. Two weeks ago, Knight Ridder named Jean H. Mordo as its chief financial officer.

For many newspapers, 2000 was a banner profit year, in part because the Internet spending boom helped fuel newspaper ad buys.

Harris took over at the Mercury News in 1994, just as the Internet promised to revolutionize news gathering and distribution. The paper, in the heart of Silicon Valley, tried to position itself to cover the revolution, becoming the first daily to offer online distribution.

On Friday, Harris talked about job cutbacks with Steve Rossi, president of Knight Ridder's newspaper division, and other managers. During the meeting, Rossi told Harris he didn't want to lay off any "full-time newsroom employees and hoped to avoid layoffs of full-time employees elsewhere" at the Mercury News, according to a memo to staffers by Ridder, Rossi and other executives.

Reporters and editors said they were shocked and flabbergasted by Harris' sudden departure.

"I don't think I know a better human being than Jay Harris," said Mike Antonucci, a writer with the paper for 24 years. "This is being seen as an extraordinary act of conscience that I hope will be meaningful other than just symbolically."

Harris has worked in journalism for three decades as a reporter, editor, professor and executive. He has been one of the nation's most prominent minority voices in journalism. His professional career began in Wilmington, Del., at the News Journal papers.

Harris is credited with broadening the Mercury News' coverage of an increasingly diverse population. The paper launched Nuevo Mundo, a Spanish-language paper, in 1996 and Viet Mercury for the valley's substantial Vietnamese community in 1999. But it was his willingness to expand the business department to cover the Internet revolution that boosted the paper's reputation and earned him fans in the newsroom.

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Times staff writer David Shaw contributed to this report. Times wire services were used in compiling this report.

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