WALNUT CREEK — The company that owns dozens of daily and weekly newspapers around the Bay Area, including the Times, Oakland Tribune and San Jose Mercury News, announced a shakeup on Tuesday, replacing John Armstrong as president and publisher of Bay Area News Group-East Bay and folding local circulation and advertising operations under San Jose-based leadership.

Michael "Mac" Tully, president and publisher of the Mercury News and group vice president for Bay Area News Group, or BANG, made the announcement before a crowded Contra Costa Times newsroom that, along with the other East Bay papers, has seen dozens of layoffs and employee buyouts this year as the newspaper industry flails under a limp economy and changing reader habits.

Armstrong will leave Oct. 15. David Rounds, vice president of circulation for the Mercury News, replaces him. Rounds, 58, of Livermore, is a 35-year newspaper veteran who has worked at most of the BANG daily papers in advertising, circulation and operations.

BANG leadership "concluded that I didn't have the skill set that really was a good fit for the company as it moves forward," said Armstrong, a 45-year newspaper veteran who said he was told of the move last week.

Tully, former publisher of the Kansas City Star who took over leadership of BANG early this year, declined to elaborate on the decision to replace Armstrong, saying only that he had needed time to assess the operation.

"I don't

think anyone has tried harder than John. I don't think anybody loves these newspapers more than John or the communities they serve," said Tully. "He worked his tail off and the effort shows."

Armstrong came to the Times as editor in 1995, less than a week before Times heiress Margaret Lesher sold the Contra Costa Times and its sister editions — the West County Times, Valley Times, San Ramon Valley Times and East County Times — along with its other publications, to Knight Ridder for $360 million. He took over leadership of all East Bay operations in 2006 with the purchase of the Times newspapers by the California Newspaper Partnership, run by Denver, Colo.-based MediaNews along with its partners Stephens Media Group and Gannett.

The purchase joined together once rival newspapers in the Times and its sister papers, the Oakland Tribune, Alameda Times-Star, Tri-Valley Herald, San Joaquin Herald, Fremont Argus, Hayward Daily Review, San Mateo County Times, their respective Web sites and 20 bi-weekly or weekly papers, magazines and other publications.

Dan Smith, East Bay circulation vice president, will expand his duties to oversee all of BANG circulation. Michael Turpin, San Jose advertising and marketing vice president, likewise will oversee those functions across all BANG publications and web sites.

Admired among many Times colleagues for his clear-headed news judgment, calm demeanor and spirited humor, Armstrong, 65, oversaw a difficult melding of once-competing organizations and immediately faced the harsh realities of a steep slide in advertising revenue that has slammed the industry. Lately, the real estate downturn has siphoned advertising revenue in all areas, including retail, jobs and auto sales.

Armstrong also faced a successful union organizing campaign of journalists in BANG-East Bay.

"I don't know anybody in this business who's been around any time at all that doesn't say this is by far the most difficult financial environment newspapers have ever had to operate in, at least in our lifetime," said Armstrong after the announcement.

Tully said the consolidation of advertising and circulation leadership will "create a more coordinated and sophisticated strategic attack" for generating revenue. He expressed optimism in the future of both the East Bay papers and the newspaper industry, and said there are no immediate plans to merge any of the individual newspapers, although they all share stories.

"We do something that really nobody else does that's totally valuable to people," said Tully. "People really want to know about the schools their children attend, the roads people drive on, the safety of their neighborhood, the city council election, how their tax dollars are being utilized. Everybody wants that information. What is changing, and what is causing turmoil in our industry, is how people want to receive that information."

Armstrong said he plans to work on his golf game and hopes to move with his wife, Sandy, back to San Diego, where he had served for 17 years as publisher of daily and weekly papers before moving to the Bay Area. Prior to that he worked as an Associated Press newsman and executive.

"We've been here 13 years," he said. "It's the best 13 years of my professional life."

Reach John Simerman at 925-943-8072 or jsimerman@bayareanewsgroup.com.