New York Times results hit stock; chairman backs incoming CEO
(Reuters) - The New York Times Co (NYT.N) posted worse-than-expected results on Thursday as advertisers cut spending on both print and digital outlets, sending its shares down 22 percent.
The weak quarterly earnings came as a scandal is unfolding at Britain's public broadcaster the BBC, whose former head Mark Thompson is due to take the helm at the New York Times Co as president and CEO on November 12.
New York Times Co Chairman Arthur Sulzberger Jr. told analysts on a conference call on Thursday that he supported Thompson.
The British Broadcasting Corp has been damaged by the accusations of sexual abuse of young girls and women by a late TV host, Jimmy Savile. The scandal also involves a BBC news program on Savile that was shelved.
Sulzberger said Thompson, who served as the director general of the BBC until September, "provided a detailed account" of his involvement with the program and is starting as planned.
"I am satisfied that (Thompson) played no role in the cancellation of that segment," Sulzberger said. "Our opinion ... remains that he abides by high ethical standards and is the ideal person to lead our company."
New York Times Public Editor Margaret Sullivan, who writes about issues affecting the newspaper, has questioned whether Thompson is fit to serve as CEO. He has not been implicated in the controversy.
Earlier, the company reported that revenue slipped almost 1 percent to $449 million, missing analysts' estimate of $479.23 million, according to Thomson Reuters I/B/E/S.
Adjusting for severance costs and other special items, the company a quarterly loss of 1 cent per share, well below expectations of earnings of 8 cents per share.
A 7.4 percent rise in circulation revenue, helped by the company's digital subscription plans, could not offset a persistent slump in advertising sales.
"It wasn't a nice quarter on revenue," said Edward Atorino, an analyst with Benchmark Co. "The advertising numbers look terrible. I thought they might do a little better. They are caught up in the downslide like everybody else."
The stock tumbled 22 percent to close at $8.31 on the New York Stock Exchange.
DIGITAL REVENUE DROPS
Print ad revenue, coming primarily from its namesake newspaper and the Boston Globe, dropped almost 11 percent from a year earlier - an even steeper decline than the previous quarter.
Digital ad revenue, once a bright spot for the company, fell 2.2 percent.
The company attributed the declines to the "challenging economic environment, ongoing secular trends and an increasingly complex and fragmented digital advertising marketplace."
Advertising revenue at The New York Times depends largely on national accounts from sectors like telecommunications and technology that use the newspaper to reach people across the United States.
"I think that really reflects that national newspaper revenue is much more exposed to secular pressures than the local retailer," said Leo Culp, an analyst with Citi.
The trend of declining national ad revenue was apparent at Gannett Co (GCI.N), the largest U.S. newspaper chain, and its national newspaper USA Today, a competitor to the Times.
While Gannett turned in better-than-expected results last week, national advertising, primarily through USA Today, was down almost 8 percent at its U.S. newspapers.
Advertising is expected to remain sluggish at the New York Times this quarter - typically the strongest one for the newspaper industry as it is buoyed by holiday spending.
"We are hearing from business leaders that they are extremely concerned, and the lack of business confidence is growing in many, many segments," said Denise Warren, the company's chief advertising officer, on the call.
Paid subscribers to the digital editions of The New York Times and sister paper International Herald Tribune increased 11 percent and totaled 566,000.
Once a sprawling media conglomerate, The New York Times has tightened its focus and shed assets. Over the past year, it sold a group of newspapers in the U.S. Southeast and in California, digital property About Group and stakes in sports ventures including the Boston Red Sox and Liverpool Soccer Club.
It is now down to a handful of newspapers, including its flagship, the Boston Globe, the Worcester Telegram & Gazette and the International Herald Tribune.
(Reporting by Jennifer Saba; Editing by Jeffrey Benkoe and Richard Chang)