Dow Jones & Co., publisher of The Wall Street Journal, named chief operating officer Richard Zannino on Tuesday to become its new CEO, replacing Peter Kann, who will remain as chairman until 2007. The company's shares rose sharply on the news.
The company also announced that Wall Street Journal publisher Karen Elliott House, who is Kann's wife, will retire from the company by mutual agreement. House, like Kann, had a long career as a journalist at the Journal.
House will stay on for a transition period of several months, but her position will likely evolve to include more oversight of the company's growing online operations, Zannino said in an interview. Zannino said he would be working with the company's board in the coming weeks to further define that role.
"In a world where readers are viewing The Wall Street Journal more as a franchise and less as a channel of distribution, one could envision a different structure that may or may not have a standalone print publisher," Zannino said.
A former garment and retailing industry executive, Zannino becomes the first non-journalist in recent memory to lead Dow Jones, a storied publishing company that traces its roots to 1882. Both Kann and House have won Pulitzer Prizes, journalism's top honor.
Zannino joined Dow Jones in 2001 as its chief financial officer, and currently oversees the company's day-to-day operations as chief operating officer, reporting to Kann. He will take over the CEO duties effective Feb. 1. Kann became CEO in 1991.
Zannino had been considered a leading candidate to succeed Kann, whose stewardship of the company had been marred by several difficulties, including the ill-fated purchase of a financial data supplier, Telerate, and nearly five years of declining advertising volume at the Journal.
Gordon Crovitz, the head of electronic publishing at Dow Jones, had also been seen as a contender for the CEO job, and House's name had also been mentioned. Crovitz, 48, is seen as a likely successor to House as publisher of the Journal with additional responsibilities for online operations.
Investors applauded news of Zannino's appointment, sending Dow Jones' shares up $3.65, or 10.3 percent, to close at $39.14 on the New York Stock Exchange. The shares are trading approximately where they were a decade ago, having run up as high as the $70's in the dot-com boom of 2000.
John Morton, an independent newspaper industry consultant based in Silver Spring, Md., called the selection of a relative newcomer to Dow Jones as well as a non-journalist as CEO a "break with tradition" for the company, though he noted that may be exactly the kind of change investors had been hoping for.
"Clearly Wall Street hasn't been tremendously enthusiastic about Kann's role or the company in recent years, so there's a certain amount of relief," Morton said. "It does remove a question mark."
Dow Jones also sharply raised its guidance for fourth-quarter earnings Tuesday, saying it now expects to report earnings before one-time items of about 40 cents per share, versus its previous forecast of mid-30 cents per share, because of better results at the Journal and its electronic publishing businesses.
Doug Arthur, a newspaper industry analyst at Morgan Stanley, told clients in a note Tuesday that "we like (Zannino) a lot," and Deutsche Bank analyst Paul Ginocchio said "he has a strong grasp of industry dynamics and will be a good leader for the company."
Kann was facing mandatory retirement from Dow Jones under company rules by the end of 2007, the year in which he turns 65. He is currently 63 years old; Zannino is 47, and House is 58.
Dow Jones also faces a succession issue at the Journal, where managing editor Paul Steiger must step down by the end of 2007, the year in which he also will turn 65. Kann said in an interview that Steiger had a "ways to go" in his tenure, and that an announcement of his succession is "not imminent."
Dow Jones has suffered more than other newspaper publishers from an industrywide slowdown in advertising, blaming the prolonged slump in the Journal's heavy reliance on financial and technology advertising.
The paper has been trying to diversify its ad mix by adding new sections and a Saturday edition with more coverage of consumer affairs, leisure pursuits and personal finance.
Before coming to Dow Jones, Zannino had held various finance and strategy positions at other companies including Liz Claiborne Inc., General Signal Corp. and Saks Holdings Inc.
In addition to the Journal, Dow Jones also publishes Dow Jones Newswires, several major market indicators including the Dow Jones industrial average, the weekly Barron's and a group of community newspapers.