Cutbacks at major newspapers have done little to reassure Wall Street investors, one observer of the media business has said.
Alan Mutter, author of the blog Reflections of a Newsosaur, wrote last Wednesday that precipitous drops in the value of stock at news companies such as Gannett, McClatchy, and the New York Times Co. have made taking the companies private a viable and worthwhile option.
“Because newspapers have not found a way to reverse the accelerating deceleration of their sales, they have been cutting the heart out of the core product in an unavailing, self-defeating effort to reach high enough profitability to please Wall Street,” he writes. “But that has not been working, as the relentless pummeling of newspaper stocks attests.”
Some of these companies, particularly McClatchy and the New York Times Co., could potentially face rogue investors.
“Given the depressed value of their shares and the relative ease of financing a potential transaction,” Mutter wrote, “companies like MNI and NYT could be on the radar of hostile takeover specialists.”
It isn’t entirely unthinkable, either. The former owners of Dow Jones showed that long time family ownership could be worn down with enough pressure and money, Mutter wrote.
The loss of profits has been noticeable. Editor and Publisher recently reported that the New York Times Co.’s profits were off from last year, and its net income dropped to $21.1 million. Overall, the company’s revenue missed its Wall Street target by six percent.
While it may not be the answer, Mutter writes it will be easier on employees and management.
“A well-conceived going-private transaction would give harried newspaper workers an opportunity to turn their full attention to the business of saving their businesses, instead of battling to sustain unsustainable profits,” he wrote.
