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I guess I'm a bit old school, but I like the idea of walking to my mailbox to get my newspaper. I even like the feel of the ink that bleeds onto my fingers, but I recognize that I'm a bit unique.
Too unique, actually, and that is a problem for the newspaper business.
Yesterday, we learned that the old Tribune Company, privately owned by billionaire Sam Zell, is filing for protection under bankruptcy law. The company is drowning in a sea of debt and trying frantically to sell assets in order to raise cash.
It is obvious to management that subscriptions and advertising revenue will not be enough to pay off debt. The company will need to work with creditors on delaying principle and interest payments while it raises cash.
With the advent of the Internet and explosion of cable news networks, little old print media is going the way of the buggy whip.
Across the newspaper business, circulations have been falling for many moons and advertising dollars are taking their business elsewhere. Losses have been piling up, making it difficult to pay down debt used to consolidate the industry.
It's a complete mess.
Some people are wondering what the Tribune Company's bankruptcy means for others in the newspaper business like The New York Times Company (NYSE: NYT)?
Tribune is in a unique situation given its massive $13 billion debt level. By contrast, NYT has a smaller debt level, totaling a bit more than $1 billion.
That said, a billion dollars in debt is not a good thing when the economy is tanking and credit is frozen. Oh, and your industry is hosed. Will it ever get better?
I guess the real question to ask relates to NYT's ability to make a profit. If it can, then maybe survival is in the cards. If it cannot, then the end is near.
During the past five years, it has been a slow march to zero for NYT. Starting at $50 per share, the company now trades for less than $10 per share. The trade reflects declining profits over the same period.
NYT is a franchise that is most likely to survive from here. While the print edition may continue to falter, its online business may help to offset the pain. Is that enough to buy the stock at these levels? Despite the losses in share value, NYT can certainly fall further from here.
Louis Navellier's PortfolioGrader Pro, which offers free ratings for nearly 5,000 Wall Street stocks, rates NYT a C or hold.
The Tribune Company outcome is not likely for The New York Times Company, but I would only own NYT shares at around the $5 or lower level.
Jamie Dlugosch is a contributor to InvestorPlace.com.
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Reader Comments (Page 1 of 1)
12-10-2008 @ 10:03AM
oelvis55 said...
I for one, would be happy to see the New York Times bite the dust. Their editorial policy has been far left and inexplicably anti-Israel and pro-Palestininan. Gone are the days when they would follow their motto of "All the news fit to print." They have failed their readership and now it is time to go out of business. It is long overdue.