The New York Times Company (NYSE:NYT) is set to report its third quarter earnings Thursday, October 25. The company had an eventful third quarter that saw the sale of About.com for $300 million and the appointment of Mark Thompson as the new CEO.
Since the print newspaper industry is witnessing a secular decline, we will continue to focus on New York Times’ digital subscriber growth, which will be the primary driver for revenue growth going forward. Additionally, since this will be Thompson’s first earnings call as CEO, we are keen to know his strategy to grow NYT’s digital business and his plans to use the cash proceeds from the sale of About.com.
New York Times posted a second quarter loss from continuing operations of $0.57 per share.  Its operating income included a $0.85/share non-cash write-down for About.com (which was sold during the third quarter), without which the firm would have reported earnings of $0.14 per share. The primary driver for growth during the quarter was digital subscription, which was up 13% q-o-q.
On August 14, the company brought on Mark Thompson, previously a director at the British Broadcasting Corporation (BBC), as its new CEO. We thought this was a good choice since the company now has a top executive with extensive experience at a digital media company. Thompson’s appointment should help NYT focus on innovation in digital media.
Since this will be Thompson’s first earnings call as CEO, we are interested to know his thoughts on NYT’s digital strategies. We expect more emphasis on social and mobile but will have to wait and see to know more on specific initiatives, if any.
Direction about About Group Cash
NYT announced August 29 that it finalized the sale of the About Group to InterActiveCorp (IAC) for approximately $300 million. ((Form 8-K, SEC)) We expect the cash from the sale to be spent on improving the company’s digital offerings, but NYT has yet to release clear strategic initiatives on how it aims to grow revenues on the digital front. Hence, during the earnings call, we will be watching closely on how the company plans to spend the cash from the About.com sale.
Watching Digital Subscriber Growth
It is imperative that New York Times shows some improvement in online subscriptions since digital subscriptions will be its primary business driver going forward. We expect the company will reach approximately 550,000 digital content subscribers by the end of 2012, and about 1.2 million subscribers by 2019, the end of our forecast period.
However, we believe these numbers are only achievable if New York Times is able to maintain the quality of its content offerings. The appointment of Thompson as CEO could be a catalyst in growing the company’s digital products, but anything he comes up with will likely face stiff competition from competing sites such as Huffington Post.
We currently have a $7.31 price estimate for New York Times, which is approximately 30% below the current market price.Notes: