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 is a bright spot for the future. Indeed, without the impact of, total sales would have increased a mere 1%. New York Times' statement that advertising revenues increased 6.2% sounds heartening; excluding, 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), and Washington Post (NYSE:WPO) -- have a definite competitive advantage, it has proven a difficult industry in which online properties have proven increasingly essential to bolstering the results.

New York Times has plans up its sleeve, to be sure. It plans a new supplement called Play, a New York Times sports magazine that will come out four times a year. It has also rebranded T, a Sunday supplement. The company's also trying to boost customer loyalty through awards points programs; Times Select, its online subscription service for archived content and proprietary commentary, is free of charge to what the company describes as its loyal readers who already subscribe (it charges a monthly fee to those who don't subscribe to the physical newspaper).

Is New York Times a value? With a P/E of 13 and a share price darn near its 52-week low, I can see why investors might wonder. In addition, New York Times said it's optimistic about ad demand and plans a rate increase. Furthermore, it plans to boost what it charges for home delivery, which the company doesn't believe will have a negative impact. (Given readers' defection to free online news, I've got to wonder.) On the other hand, its balance sheet doesn't look too hot, considering the company has just $45 million in cash and a daunting $1.4 billion in debt.

I can see the logic in assuming that respected national newspapers like The New York Times will survive these difficult days of change. However, with the industry still evolving and a lot of data pointing to continued negatives in the growth outlook, I'd be reluctant to think that the time to invest is now.

Extra, extra, read all about it:

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Alyce Lomax does not own shares of any of the companies mentioned.