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New York Times in a Bind

http://www.fool.com/investing/high-growth/2006/01/25/new-york-times-in-a-bind.aspx

Alyce Lomax
January 25, 2006

It was a rough 2005 for the newspaper industry, and judging by New York Times' (NYSE: NYT  ) quarterly earnings report Tuesday, the struggles aren't over. Although there were some bright spots, it's apparent that New York Times is still ensnared in the challenges of an industry that is being forced to evolve.

New York Times reported that fourth-quarter profits fell 41% to $64.8 million, or $0.45 per share, due to charges related to its staff reductions, accounting changes, and stock options expensing. Total revenues increased 3% to $931 million, which the company said was a better-than-expected boost. The company also said that ad demand showed surprising strength toward the end of the quarter.

Despite the fact that some of the acquisition costs are showing up as short-term pain, one can surmise that the acquisition of popular Internet answer hub About.com is a bright spot for the future. Indeed, without the impact of About.com, total sales would have increased a mere 1%. New York Times' statement that advertising revenues increased 6.2% sounds heartening; excluding About.com, they would have increased 3.6%.

This only emphasizes newspapers' increasingly difficult position, as many readers -- and, therefore, advertisers -- flock to the Internet, putting pressure on both ad and circulation revenues. Foolish colleague Tim Beyers wrote about the industry's struggle as recently as November. I myself have definitely wondered if the writing's on the wall -- or at least, the Internet -- when it comes to old-fashioned newsprint.

Although companies that distribute newspapers with national readership -- which include New York Times, Dow Jones (NYSE: DJ  ) , Gannett (NYSE: GCI