Dow Jones said its flagship Wall Street Journal will make a number of design and content changes to the newspaper’s American print edition over the coming months, including shrinking the newspaper’s page size by 2007.

The changes from the estimated $43 million project will better serve readers and result in yearly savings of $18 million in operating expenses, the publisher said in a press release yesterday.

The company said the improvements will include changes to the Journal’s organization, navigation, and content, as well as stronger links to the Wall Street Journal Online at WSJ.com.

Dow Jones will reformat the Journal to a more industry-standard 48-inch web width from its current 60-inch web width, the company said.

Dow Jones said retrofitting 19 presses in the Journal’s 17 print sites to print the new web width will require about 15 months. The newly formatted paper will launch by January 2007.

The publisher expects to invest $3 million in 2005, $36 million in 2006 and $4 million in 2007 to retrofit the presses. Excluding one-time start-up costs, Dow Jones expects to save about $18 million a year in operating expenses, mainly for newsprint, starting in 2007. The operating-expense savings are reflected after about $4 million a year in non-cash depreciation expenses.

The company will incur about $13 million in one-time training, development, and marketing costs for the project: minimal costs in 2005, about $10 million in 2006, and $3 million in 2007.

Dow Jones said the project will generate an after-tax return on investment of about 26% with a payback period of less than three years. The company expects the changes will cut 2006 earnings per share by about 7 cents and add to annual per-share profit in 2007 and thereafter by about 13 cents. Analysts, on average, predict 2006 earnings of $1.40 a share and 2007 earnings of $1.85 a share, according to Thomson First Call.

Managing Editor Paul Steiger said in an internal memo to Dow Jones employees that going to a smaller web width “will give us the flexibility to contract out our printing in some locations that are hard to reach from our existing printing plants but where opening new plants isn’t feasible.” This will allow readers in those areas to receive a later edition of the Journal while reducing distribution costs, the company said.

A spokeswoman for Dow Jones said the Wall Street Journal’s web width will be shrunk by 20%,or about one column narrower. “This will be a 20% reduction in size of paper but we will be reducing the news hole only about l0% – not 20% – which means we will add some pages to the paper to not realize a full 20% reduction,” she said.