Slashing the quarterly dividend to 6 cents from 23 cents will help the company save cash, reduce debt and improve its liquidity. It's a move that observers called for long ago, only to see the company increase the dividend last year to 23 cents from 17.5 cents.
"When they increased it last year, I thought it was a mistake, but I thought strategically the reason they did it was they were trying to separate themselves out of the pack," said Ken Doctor, a newspaper veteran turned media analyst for Outsell, the research and advisory firm. "They were saying we're a premium newspaper company. But events overwhelmed them."
Those events notably include this fall's financial calamities and broad economic decline, which have affected many companies and industries -- but especially newspapers. "We are in uncharted territory for the economy as a whole and the newspaper industry in particular, given the stress on the retailing industry and the long-running erosion of ad sales in the major classified categories -- auto, employment and real estate," Alan Mutter, the former newspaper editor who is now a Silicon Valley entrepreneur, wrote in an early October blog post. The Times Co. said yesterday that ad revenue fell 16.2% in October, compared with October 2007.
It isn't clear how much print advertising will return to newspapers when the economy recovers, so the future of newspapers looks bleaker than ever. That's depressing stock prices so far that some are suggesting newspaper shares have hit bottom.
The stock price is so low, at a minimum, that taking the company private wouldn't cost the Sulzbergers nearly as much as a year ago. Going private has been suggested as a way to insulate the company from the demands of Wall Street.
The new problem is that worsening conditions keep increasing the costs of operating the business, whether it's private or public. When the Times Co. looks to replace an expiring credit facility next year, skittish banks are going to demand steeper pricing. And the competitive playing field ahead includes companies such as News Corp., the BBC and Bloomberg, whose revenue models are considerably less dependent on newsprint ad sales.
"They need to figure out how they can get enough capital," Mr. Doctor said, "to compete against bigger, deeper-pocketed and more diversified competitors."