The Times Goes Soft

The Times, it is a-changing -- or at least trying mightily to do so. In this case, I'm referring to New York Times (NYSE: NYT  ) , the newspaper-publishing company, which reported generally disappointing third-quarter results yesterday. The company's basic difficulty -- growing competition from the Internet -- has permeated its industry. While management clearly is attempting to alter the company's profile in favor of online content, its efforts may be tantamount to pushing on a string.

New York Times' results were soft, but not horrible. In a real sense, they represented an industry slowly and inevitably sliding backward, with minimal prospects for regaining meaningful traction. Total revenues were down 2.4% to $739.6 million in the quarter, while advertising revenues fell 4.2%. Circulation revenues slid 1.3%, but the slide would have been greater if not for price hikes in several markets. Earnings per share were $0.10, one penny less than analysts' consensus.

But now, with advertisers turning from newspapers to online high-traffic sites, New York Times' management is diligently attempting to trim costs and restructure operations. In the process, it is steadily cutting staff -- many on the editorial side -- and consolidating locations.

Management also has announced plans to sell its nine network television stations. That group clearly is expendable, generating only about $150 million in annual revenues, or about 5% of the company's total. Its bottom-line contribution this quarter was about $0.03.

The difficulty for the Times and its shareholders is that online revenues, while likely to rise to $250 million this year, are still dwarfed by the core newspaper business. I sense that management would love to awaken to miraculously find Internet-related operations constituting the bulk of its business. While the company has been slow to leverage this shift, investors have watched their share price decline steadily from around $50 four years ago to slightly below $23 today.

As that share price withers further, rumors of a potential leveraged buyout, led by the controlling Sulzberger family, have become more commonplace. But a question dealing with that possibility was neatly sidestepped during Thursday's conference call.

The company is in the same boat with other newspaper publishers, including Tribune (NYSE: TRB  ) , Gannett (NYSE: GCI  ) , and Dow Jones (NYSE: DJ  ) , each of which has reported a soft quarter. With the same problems facing New York Times and its rivals, this is one investing vessel I'm not willing to board just yet.

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Fool contributor David Lee Smith still enjoys curling up with the Sunday New York Times -- and receiving comments at davidleesmith@tampabay.rr.com. He doesn't own shares in any of the companies mentioned.


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