New York Times: Investor Interest Should Propel Management to Boost Margins -- Barron's

| About: New York (NYT)

Excerpt from our One Page Barron's Summary (receive it weekly by email by signing up here):

Ink-Stained Opportunity by Andrew Bary

Highlighted companies: The New York Times Co. (NYSE:NYT), Dow Jones & Company Inc. (DJ), Gannett Co. Inc. (NYSE:GCI), McClatchy Co. (NYSE:MNI)
Summary: Last week Morgan Stanley Investment Management (a 7.6% owner) nytchallenged the New York Times Co. over its dual-share-class ownership, which enables the Ochs-Sulzberger family to control the board with its Class B stock despite its paltry 1% economic interest (the family all told owns 20%). The Times counters that the dual-class structure was in place when the Times IPOed in 1969, and has never been a secret to investors. Barron's surmises that the challenge, at least, will force Times management to improve its presently weak performance: (1) At $24/share, its stock is half its 2002 peak, and at par with 1987 prices. (2) Weak advertising revenue has profits falling (Q3 2006 $0.16/share vs. $0.21 in 2005). (3) Its 1993 $1 billion Boston Globe purchase failed to pan out; Globe ad revenues have plummeted and it's become a buyout candidate (rumors are GE CEO Jack Welch for $600m). (4) $3b share buybacks over the past decade at an average price of $37. (5) Its management is seen by investors as aloof; just 1 out of 15 Street analysts give it a Buy. But the Street may be wrong: (1) Barron's analysis suggests a net-worth of $35/share. (2) There have been rumors of a family buyout (a takeover is unlikely due to the Class B shares). (3) Its margins are estimated at 10-15%, half of other prominent media outlets. There is room to improve, even while maintaining its hailed gold-standard reputation. (4) Moving to a fancy Manhattan tower has put it in control of $850m of hot real-estate. (5) Once criticized for overpaying ($410m) for, the website is now considered to be worth considerably more. Barron's conclusion: "Among newspaper publishers, few have better properties and more opportunity to boost margins. A takeover, albeit unlikely, would be the icing on the cake."
Quick comment: Commentary: Scary Times for Newspapers: Sharpest Circulation Drop in 15 YearsTwo weeks ago, Barron's Bill Alpert quoted Seligman's Paul Wick as being bearish on NYTDeclining Print Ad Revenues Take Toll on Newspaper EarningsNew York Times Weighed Down by BostonNew York Times Buyout Rumors Spark Heavy Wall Street ActivityWhy Google Didn't Buy the New York TimesReal Value Remains In New York Times, But Is the Will There?Cramer's Take on NYT. Earnings conference call transcript: Q3 2006