In a bid to stay afloat in an industry in crisis, magazine and newspaper publishing giant Hearst Corp. is getting set to launch an “electronic reader” later this year, a device designed with periodical-reading in mind. Hearst publishes a number of titles, including magazines Seventeen, Cosmopolitan and Esquire, and newspaper The San Francisco Chronicle.

Fortune (at Money.CNN.com) quotes unnamed “industry insiders” as saying that the Hearst e-reader will have a large screen to accommodate the traditional layout of “dead-tree” newspapers and magazines. Hearst is rumored to be offering to share the device and its “underlying technology” with other publishers.

It is expected that the Hearst e-reader will use electronic “ink” like the Amazon Kindle and Sony Reader. Not conincidentally, Hearst is already an investor in E Ink, the company which supplies the electronic ink technology to those and several other portable e-reader device makers. It is even possible that the reader will be foldable, to stash in a purse or briefcase, just like dead-tree publications.

Fortune speculates that Hearst will sell the devices to other publishers in return for a share in the revenue from magazine and newspaper sales the devices will generate. Sales of the e-reader device itself will not be a money-maker for the company, IT World says.

This new direction for electronic distribution of Hearst’s (and competitor-publishers’) titles comes at a critical time for the company. Just earlier this week, Hearst announced that, if they cannot cut expenses in the next few weeks, their landmark San Francisco Chronicle newspaper may close.

Simply moving Chronicle content online, and onto wireless e-readers, may not be enough. We pointed out earlier this week that fluffy gossip site Perez Hilton gets more traffic than the Chronicle, despite a great breadth and depth of news reporting there.

Newspapers and magazines are facing sharply declining advertising revenues, and decreases in circulation/subscription numbers. As the overall economy declines, readers and advertisers alike are shifting their attention and their business elsewhere.

Although Valleywag snarks that the new device is “the last stand of a doomed industry,” that readers won’t forsake their iPhones and netbooks in favor of Hearst’s e-reader, the sheer novelty and convenience of the new Hearst e-reader gizmo may, at least initially, garner a following.

Photo: Boston City Walk