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Bleeding ‘Times’ Blood

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When the Times did use its cash to acquire new assets, those bets rarely panned out. Believing that television was the medium of the future, Sulzberger overpaid for the Discovery Times Channel, which failed and was sold. All told, the company’s major newspaper and TV acquisitions since 2000 have lost more than $1.5 billion in value. Sulzberger made what appears to be a smart move in acquiring About.com, a highly trafficked information hub, in 2005, but when the Times had a special opportunity to get in on pre-public financing of Google, it passed—perhaps the single worst business decision of Sulzberger’s tenure, says one Times intimate.

Sulzberger hasn’t acted entirely alone. His cousin Michael Golden, vice-chairman of the company and until recently publisher of the beleaguered International Herald Tribune (the acquisition of which cost the company $65 million), oversaw the sale of the old New York Times headquarters on 43rd Street—which the buyer turned around and sold three years later for a $350 million profit (enough to fund the newsroom for more than a year, notes one Times veteran). A new headquarters on Eighth Avenue, designed by architect Renzo Piano and costing the Times about $500 million (roughly 25 percent of the company’s total market capitalization), was also his responsibility and is seen as a sign of the family’s dedication but also its vanity. “Man, he loves that building,” says a former Times executive who knows Golden.

Meanwhile, the company continues to suffer the failed strategic investments of Sulzberger’s father, such as the Boston Globe, which, along with another Times-owned paper, led to an $815 million write-down in 2006. Many at the Times believe Sulzberger Jr. hangs on to the Globe only out of deference to his father.

Smelling weakness, Wall Street agitators have pressured the family to cut costs, squeeze more value out of the stock, and loosen its grip on management. Last year, London-based Morgan Stanley fund manager Hassan Elmasry presented the board of directors with a litany of criticisms of Sulzberger’s management, suggesting that the stock price might be improved with new leadership and an overhaul of the dual-class stock structure that allows the family to maintain monarchal control over the business. Not surprisingly, neither Sulzberger nor the family members on the board were interested in ceding control of the company. In retaliation, an angry Sulzberger pulled the family’s personal holdings, approximately $200 million in New York Times stock, from an account at Morgan Stanley.

In general, Sulzberger and his family have affected indifference to critics. It’s written in the company’s proxy statement that the Ochs-Sulzberger trust reserves the right to put its own aim, to protect the journalistic independence of the paper, ahead of those of the shareholders. Sulzberger views himself as a barrier between the expensive 1,300-person newsroom—the engine of the paper’s reputation as the best newsgathering operation in American media—and Wall Street pressure to save money by laying off editors and reporters.

Nevertheless, Sulzberger partially relented to a shareholder insurgency led by two hedge-fund traders pressuring the paper to cut costs and take more advantage of the Internet. Sulzberger quietly steamed at the most high-profile critic, Scott Galloway, a professor at New York University who runs Firebrand Partners, telling one colleague he “can’t believe this guy’s arrogance.” But eventually he agreed to expand the paper’s board of directors to include appointees chosen by the insurgent traders, including James Kohlberg of the private-investment company Kohlberg, Kravis, Roberts & Co. The move seemed to contradict the “What, me worry?” attitude Sulzberger presents to friends and associates at the paper. “If [Sulzberger] really is that sanguine, why would he let these guys on the board?” asks one Times staffer.

Sulzberger has acknowledged that his own family suffers along with his shareholder critics. “All of us—my family and you, our shareholders—have felt the pain of this disruption,” he said in 2007, referring to the Times’ flagging financial fortunes. People familiar with the family’s trust say it is surprisingly undiversified, with a high proportion in Times stock. The family’s collective and individual shares are valued at a third of what they were worth in the late nineties. One Wall Street executive briefed on the family’s holdings estimated that the central trust is now worth somewhere between $270 million and $300 million. There are individual investment trusts for each line of the family as well—each with inside jokes for names like Trifoos Capital Investors (for the three siblings whose last name is Dryfoos) and Pudding Partners (the Sulzbergers, including Arthur’s sisters). But those too have taken a hit: Late last year, each of the separate family trusts made rare sales of about $500,000 a piece in class-A stock—sales that would have been worth $1.3 million seven years ago.


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