Street Speculator

Everyone knows, especially those on Wall Street that newspapers and newspaper companies are becoming dinosaurs. Print readership is down drastically as more people go online and to the blogosphere to get their news.

The financials of many newspaper companies are also highly leveraged, including the private entities. News reports of layoffs come in on a weekly basis and the implementation of cost-cutting strategies which include reducing the size of the paper. Nothing seems to be working.

The New York Times Company (Symbol:NYT) is not immune from the current environment. Heralded as one of the most recognized newspaper companies globally, they are not without problems.

The stock currently trades at $7.26/share, off tremendously from their 52-week high of $21.14. The TIMES also has $1.4 billion in debt on its books and advertising revenue for the print edition is down and continues to fall. Yet the company continues to pay an annual dividend to its shareholders (The SPECs have no idea why).

Unlike other media and newspaper companies, the TIMES has an asset it can use to shore up its balance sheet and potentially clear its heavy debt load.

THE DIGITAL/ONLINE BUSINESSES

The TIMES digital businesses include the following assets: nyt.com (New York Times online division), boston.com (Boston Globe online division), about.com, UCompareHealthCare.com, Calorie-Count.com, and consumersearch.com. According to the TIMES 2007 annual report, these assets generated $330 million in revenues, which amount was up 20% from 2006. Digital represents 10% of total revenues of the company.  OUR RECOMMENDATION………….

1.) Take all of the assets in the digital division and spin-off into a new publicly traded company.

2.) Use the IPO money received to pay down debt, debt contributed from the print division.

3.) The print division should only spin-off about 40% of the company, and retain the other 60% (This way “print” can still receive any profits from the online division; similar to what Microsoft [Symbol:MSFT] did with Comcast [Symbol: CMCSA] 10 years ago).

4.) Cut the dividend

SPORTS ASSETS

5.) Keep sports assets bundled with print. Sports assets include a 17.5% interest in New England Sports Ventures (owners of the Boston Red Sox, Fenway Park, and adjacent real estate), 80% of the New England Sports Network (NESN, the regional cable sports network that televises the Red Sox games), and 50% of Roush Fenway Racing (a NASCAR team). For now, the Sports industry does not seem affected by this economy.

These hypotheticals are bold steps, especially since the IPO market is not moving.  And although the TIMES is rapidly developing its “Mobile Internet Platforms” presence for Digital, their is still the perception with a connection to “print”.

If you are a TIMES shareholder, contact Arthur Sulzberger, Jr. (Chairman), and Janet Robinson (CEO) during the next shareholders meeting. Ask them and the other board members to consider this proposal.