Updated from 10:34 a.m. EDT
A slowdown in Internet-related revenue weighed on shares of
New York Times
on Thursday, even as the company's overall first-quarter results beat Wall Street's expectations.
The Gray Lady, which is struggling amid a widespread slump in the print newspaper industry, said its Internet-related revenue increased 22% for the quarter, marking a slowdown from the 41% pace it set last year.
The Times had already warned investors that Internet revenue growth would slow to 30% this year, but now it says the business will slow more than it previously expected. Its shares were recently down 51 cents, or 2.1%, to $24.05.
On the conference call following New York Times' earnings release, Chief Financial Officer Jim Follo pointed to
first-quarter revenue, which disappointed investors, as evidence of a widespread slowdown in Web advertising.
"The industry has trended down coming into this year," said Follo.
Internet-related revenue makes up only 10% of The Times' overall top line, but it's viewed as one of the only growth engines for the company as consumers increasingly turn to the Web for their information needs.
Since New York Times is mostly a publisher of printed newspapers, it's vulnerable to the slow bleed that is plaguing the industry. For its first quarter, the company reported net income of $23.9 million, or 17 cents a share, for the quarter, down from the $32.4 million, or 22 cents a share, a year earlier.
Excluding a raft of one-time restructuring charges related to the closing of a New Jersey printing plant, staff reductions and a tax adjustment, the company said it earned 25 cents a share. That beat Wall Street's expectation for earnings of 18 cents a share, according to Thomson First Call.
But weakness on The Times' top line mirrored similar problems reported by other major newspaper publishers, like
. The industry is reeling from a loss of classified advertising and the slump in national housing market and the U.S. auto industry.
The Times said its first-quarter revenue declined 2% to $786 million. Advertising revenue fell 3.4%, while circulation revenue rose 1% due to a price increase for its flagship newspaper,
The New York Times
Newspaper publishers have warned investors that the industry will suffer further in the first half of this year, while pinning their hopes on some stabilization for the industry in the back-half. Meanwhile, The Times has staked its long-term hopes on a digital future.
The company says its flagship site is the 11th most popular destination on the Web and the No. 1 newspaper Web site in the world, but with online portals and information aggregators like
and Yahoo! gobbling up the lion's share of ad dollars generated by the Internet, The Times has not cobbled together a digital business model that can match the profitability of its traditional print business.
The company has partnered with Web players like Google and
in an attempt to monetize its Internet presence, and it has made Web-related acquisitions, like the purchase About.com.
On the call, the company's executives said it's looking for more Internet acquisitions. CEO Janet Robinson said About.com's valuation has at least doubled and possibly tripled since New York Times bought the business.
She also said the company didn't overpay for Baseline StudioSystems, a more recent acquisition aimed at strengthening its Internet distribution.
"We will not make any acquisitions that do not deliver value to our shareholders," said Robinson.
Shareholders have been restless lately amid a long-term decline in the company stock price. Some have called on it to dismantle the company's dual-class share structure, which allows the Sulzberger family to maintain control of the company.
Under the arrangement, Class A shareholders, which make up the vast majority of the company's owners, are allowed to elect only four of its 13 board directors. Class B shareholders, most of whom are members of the Ochs-Sulzberger family, elect the other nine directors, giving them effective control of the company.
Two out of the three major advisory firms have recommended that public shareholders withhold votes for the company's directors as a symbolic rebuke to the structure. That sets the stage for a dramatic showdown at its annual shareholders meeting this year.
Meanwhile, in a nod to its shareholders, The Times recently announced a 31% hike in its annual dividend to 23 cents, bumping the yield to an above-average 3.8%. It has slashed costs to boost its profitability, and the company said on its call that it hired a consulting firm to help it find ways to reduce costs further.
Also, the company expects to book $10 million to $12 million in revenue this year by leasing out five floors of its new headquarters in Manhattan, and it's exploring ways to further monetize its investment in the building.
"The value of the property has gone up dramatically recently," said Robinson.