Directory publisher gets wrong numbers.

• Position: Triangle

Pick the phrase that best completes this sentence: A Yellow Pages directory is:

1. a useful way to find business phone numbers.

2. a pretty good doorstop.

3. unnecessary if you have Internet access.

If you answered "c," you're part of a trend that worries publishers. References to print business telephone directories in the United States declined from 15.1 billion in 2002 to 13.4 billion in 2007, according to a study by the Yellow Pages Association, a trade group.

Executives at Cary-based R.H. Donnelley Corp. say increased use of Internet-based directories is a big reason. While demand for information technology has fueled the Triangle's economic growth--Cary software developer SAS Institute is the state's second-largest private company--the boom hasn't been a boon to all. As more people go online for addresses and phone numbers, Yellow Pages publishers such as Donnelley have a harder time holding on to customers.

Its 2007 numbers don't look too bad, at first. After posting a loss the previous year, Donnelley netted $46.9 million on revenue of $2.7 billion--a 41% increase on what it reported in 2006. But when the numbers are adjusted for a big acquisition it made in 2006, net revenue actually dropped 8%, and net income fell 71%. Even worse, the company warned that this year will continue the downward spiral. Sales will be flat, at best, and operating income is expected to fall as much as 9%. The company also broke a promise to start paying a dividend because it needs the cash to pay down more than $10 billion in debt.

The slump forced Donnelley to eliminate some jobs earlier this year. More cuts could be coming, but the company won't provide details. It moved its headquarters in 2003 from New York to the Triangle, where about 600 of its 4,400 employees work.

Donnelley has developed some Internet offerings, but online revenue isn't enough to offset declining print revenue, says Peter Salkowski of Goldman Sachs. Analysts are divided about whether the downturn is short-term--the soft economy certainly has played a role--or the company is beginning a long-term decline as advertisers shift spending to the Internet. "We believe it's next to impossible to get customers back into a book, potentially mitigating any recovery," says Paul Ginocchio of Deutsche Bank Securities.

No county east of the Mississippi River added more people than Wake from July 2006 to July 2007. (000s) 1 Maricopa, Ariz 101.6 2 Riverside, Calif. 66.4 3 Harris, Texas 59.5 4...