Can the paper cut costs even more? It’s going to try, starting with a 100-person cut in its newsroom, which will bring headcount down by eight percent. But the Times is also counting on the ad market to pick up at some point, and it says it can now see the faint outline of a recovery taking shape.

During the paper’s earnings call yesterday, it offered a bit of insight into who was buying ads and who wasn’t. In the latter category: Banks, mutual funds and insurance companies, which were burning cash a year ago in an effort to convince customers that things were okay; movie studios and telcos also pulled back. But health-care spending was up, via big pharma and hospitals. Were they pitching consumers or legislators?

Bear in mind that ad revenue dropped 26.9 percent for the quarter, so all of this is relative. So when the Times talks about seeing “encouraging signs of improvement,” as CEO Janet Robinson mentioned in a press release yesterday, what exactly does she mean?

Here’s Robinson’s answer to that question, delivered during yesterday’s call. Transcript via Seeking Alpha:

We’re seeing improvement, a modest improvement. We’re seeing certainly more requests for proposals across the board. We’re seeing a modest growth in regard to commitment. We still are seeing just in time commitments, so the visibility continues to be cloudy, but I think we are encouraged that indeed we see advertisers telling us that their business is improving and consequently requesting more information from us in regard to rates and placement and certainly customized programs.

I’ll give you an example. The retailers in September as noted in my remarks, we started to see a little bit of a pickup. We have had in depth conversations with them in regard to their improvement. So we do see traffic improvement in regard to the stores and consequently when that’s the case, they tend to want to do more in regard to building even more traffic.

Same holds true in regard to some of the national advertisers with technology and national automotive, with certainly the bankruptcies behind General Motors and Chrysler and some activity certainly in technology and healthcare, we are seeing more commitments coming our way in regard to national schedules as well.

Surprise! They’re not that awful, at least by the diminished standards of the newspaper industry:

Excluding one-time charges, the publisher earned 16 cents per share on revenue of $570 million. Analysts expected the Times (NYT) to lose a penny per share on revenue of $561 million.

Ad revenue declined 26.9 percent, which is unpleasant but better than the previous quarter, when it dropped 30.2 percent. Internet revenue dropped by 7.2 percent and Internet ad revenue was down 8.2 percent. Both of those results are improvements over the previous quarter as well: Last quarter, Internet revenue was down 14.3 percent and Internet ad revenue was down 15.5 percent.

Some cautious optimism from CEO Janet Robinson:

Looking ahead, visibility remains limited for advertising in the fourth quarter. But as is the case across the media sector, we have seen encouraging signs of improvement in the overall economy and in discussions with our advertisers. Early in the fourth quarter, print advertising trends, in comparison to the third quarter, have improved modestly, while digital advertising trends are improving more significantly.

A little more color on digital: The big improvement this quarter was driven by a turnaround at the Times’s About.com content mill: Revenue was up 7.2 percent, way up from the 5.1 percent decline posted in the previous quarter. This makes sense, given that About is driven by pay-per-click ads and these have come back across the industry, led by Google (GOOG).

But the story is less impressive at the Times’s traditional Web sites. Ad revenue there was down 18.5 percent, which is better than the 21.6 percent drop the previous quarter, but nothing to write home about. As it has done in previous quarters, the publisher blames the decline on a drop in online classifieds, and I assume that much of the drop stems from vaporized employment ads. If this is the case, it’s going to be hard to move those numbers significantly for quite some time.

Yesterday, the publisher said that overall ad revenue had dropped 30 percent in the last quarter, which wasn’t surprising. But Internet ad revenue dropped 15.5 percent, which was a surprise, since it’s an acceleration from the previous quarter’s loss. What gives?

Times officials have multiple explanations:

1. A lot of the loss comes from our classified ads, which have been vaporized.
2. This year’s numbers don’t look good because last year’s numbers were so great.
3. At least we’re not Yahoo (YHOO)!

Check out this exchange from yesterday’s earnings call between analyst John Janedis, New York Times (NYT) digital boss Martin Nisenholtz and ad boss Denise Warren. Seeking Alpha:

John Janedis–Wells Fargo Securities: Martin, can you just talk a bit more about where you’re seeing on the display side with the news media, did any major customers pull out? And do you think you’re losing share relative to the total industry?

Martin A. Nisenholtz: No, I mean I’ll ask Denise to comment on this specific to The New York Times, but I don’t think we can point to any major losses. I think that her comments about overall volume on the side, on the businesses, is true of the digital side as well. I would point out that, to point to Janet’s [Robinson, NYT CEO] comment about most of the hit, a disproportion of the hit coming in the classifieds area.

Denise Warren: Can I just jump in and remind you again that we had a really, really, really robust quarter overall for nytimes.com last year, but really in the display area? So we are up against really significant comps. That’s just some context that I think is important that you have.

And just based upon what we’ve been seeing in the marketplace comparing to other sites there, we do believe we are taking share in the display marketplace, and we do believe we are performing better than most of our competitors in the display marketplace.

Martin A. Nisenholtz: I mean Yahoo just announced a 14% decline in display. I think, while we’re not breaking out the numbers, I think our display performance overall at nytimes.com and across the News Media Groups was better than that.

All of this sounds right to me (for the record, last year the Times’s Web ads grew 18.3 percent in Q2). But if the Times wants to keep investors optimistic about the company’s prospects, it’s going to need a better pitch than “we’re doing better than Yahoo.”

UPDATE: For a pretty good roadmap of where the Times is headed–more dollars from customers, fewer from advertisers–check out this smart piece from the Columbia Journalism Review. It notes, for instance, that the Times is now making nearly as much from subscribers as from advertisers.

The publisher was able to take a big chunk out of operating costs, knocking them down 20 percent. But revenue fell faster. The paper did say, though, that things got less bad as the quarter progressed, and that they’ll get slightly less bad next quarter, too.

The numbers: After factoring out one-time charges and benefits, the Times posted earnings of eight cents per share, well above the four-cent loss the Street was expecting. But revenue dropped 21 percent, to $585 million; the consensus was $603 million.

The Times posted an operating profit of $23.3 million; without one-time charges that number would have been $66.1 million. That’s worse than the $100 million the paper made a year ago, but much better than the $74.5 million it lost (net) in Q1.

But! Ad revenue declined 30.2 percent, an acceleration from last quarter’s 28 percent drop. In addition to the regular culprits, the Times noted a “lower volume of online advertising.” More details on that: Internet revenue dropped a shocking 14.3 percent, and Internet ad revenue was down 15.5 percent; last quarter they were down 5.6 percent and 6.1 percent.

The assessment from Times CEO Janet Robinson:

Based on what we have seen so far in July, we expect the advertising environment to continue to be challenging. We believe the rate of decline will moderate slightly in the third quarter from what we experienced in the second quarter.

As we look ahead, an enduring constant is the outstanding journalism of The New York Times Company and the esteem in which it is held by our readers. For the balance of the year, we are focused on developing innovative new products and platforms based on our high-quality journalism, particularly in the digital area, and continuing to aggressively lower our cost base to better align it with our revenues. When the economy and ad markets improve, we believe we will be very well positioned to benefit from the restructuring of our business.

But for better or worse, none of that matters to investors, who are trying to figure out what the company’s long-term prospects look like. In the near term, they look terrible.

In the first three months of this year, the New York Times Company (NYT) lost $74.5 million, or 34 cents a share once you factor out one-time charges, on revenue of $609 million. That’s worse than Wall Street’s low expectations of a five-cent loss on revenue of $630.8 million.

The reason, of course, is that the ad market is miserable in general, and even more so for newspapers. The company’s ad revenue was down 27 percent, notably worse than the awful 17.6 percent decline the Times recorded in the last quarter of 2008.

And as in the last quarter, former bright spots like the Internet business have now gone dark as well: Internet revenue was down 5.6 percent, Internet ad sales declined 6.1 percent, and revenue at the Times’s About.com unit dropped 4.7 percent.

Expect more of the same for the second quarter of this year, warns CEO Janet Robinson: “At this time, and it is early in the quarter, we believe the rate of decline in ad revenues in the second quarter will be similar to that of the first.”

The Times has been trimming costs (via salary cuts and layoffs) and has bought itself a bit of breathing room by getting rid of its dividend, taking on a very expensive loan from Mexican billionaire Carlos Slim and selling off assets like its Manhattan headquarters. It still has some moves it can make–it is trying to unload its stake in the Boston Red Sox and to find a buyer for the Boston Globe.

But at some point it’s going to have find a way to start selling more ads again. Because awards alone won’t save the paper–Pulitzers can’t even guarantee their winners’ continued employment.

The Times has stopped providing monthly revenue updates, but it has been pretty good about providing detail via its earnings calls. I’ll be on the road during today’s 11 a.m. call, but will check the transcript and get back to you later with the most interesting nuggets.

December was actually less bad than November, which was a complete disaster. The relevant numbers:

• Ad revenue down 15.7 percent, which is less awful than the 20.9 percent decline from the month before.
• Overall revenue down 9.1 percent, another improvement compared to the previous month’s 13.9 percent decline.
• The one real uh-oh stat: Internet ad revenue disappeared. Overall Web revenue dropped 11.4 percent, and ad revenue dropped 12.7 percent. Digital head Martin Nisenholtz had hinted at this in December, but it’s still shocking to see it in print. It’s the second consecutive month that Web ads have declined at the company.
• The Web decline also beat up About.com, which had been the Times’s real bright spot until recently: Revenue was down 13.2 percent there “because of declines in display and cost-per-click advertising.”

Relevant numbers from the fourth quarter: Digital advertising declined 3.5 percent. And the company also disclosed that its pension fund is now $625 million short, a sum it will have to make up over the next seven years.

The New York Times Company (NYT) had already warned that its December numbers would be rough. And it basically pre-announced that 2009 would be lousy, too–“challenging,” in the words of CEO Janet Robinson. Today she offered more guidance in that vein:

As we look ahead, we believe advertisers will continue to be cautious with their budgets, particularly in the early part of this year. To date in January the rate of decline in print advertising revenue has accelerated from what we saw in December, while that of digital is similar to last month.”

So while it’s interesting to peer at past results, the real question for Times investors–including new angel/loanshark Carlos Slim–will be “what are you doing now?” They’ll want to see the paper make steps to fix its near-term debt problems–as it’s trying to do via asset sales–and structure itself for the long haul–which it says it can do without mass layoffs, and which few people believe.

One small step announced this morning: The Times says it has hired Goldman Sachs (G) to formally peddle its interest in the Boston Red Sox and its other Boston-related sports ventures. But given that the paper was reportedly hawking those assets for months, not sure that means that much.

We may get more color about the paper’s plans during its 11 a.m. earnings call; I’ll listen in and report back.

Fear not! We’ll learn more about Slim in the near future–you can count on deep dives from both the Times and The Wall Street Journal into all things Slim.

Though I imagine some of these answers may be less interesting than people imagine. For instance, I’m pretty sure he views his Times investment as a way to earn 14 percent on his money and enjoy a nice equity kicker if the stock ever rebounds.

In any case, it turns out that Slim probably has some questions about the Times himself. Like who runs it and what they do. Financial Times:

Carlos Slim Helu, who has ridden to the rescue of the New York Times with a $250m loan this week, professed to know little about the closest thing America has to a newspaper of record just six months ago.

‘Do you know the New York Times?’ the world’s second-richest man asked one visitor in July. ‘Do you know this guy [Arthur] Sulzberger and some woman called Janet [Robinson, chief executive]? What do you think?’”

It’s too late for any more due diligence at this point, but that doesn’t mean you can’t continue to learn about your latest investment. Let me suggest two excellent books about the paper of record:

“The Trust: The Private and Powerful Family Behind The New York Times,” by Susan E. Tifft and Alex S. Jones: a doorstop of a book that’s also pretty readable. It will explain who Pinch Sulzberger is and how his forefathers built the family business.

“Hard News: Twenty-one Brutal Months at The New York Times and How They Changed the American Media,” by Seth Mnookin: a comparatively breezy read that focuses on a couple people who no longer work at the paper–reporter/fabulist Jayson Blair and his former executive editor, Howell Raines. I don’t think the Blair incident “changed the American Media,” but you can allow Mnookin some hyperbole. His book does do a very nice job of explaining the Times’s hidebound–and excellent–news tradition.

What else should Slim be reading as he studies up on his newest acquisition? Let me know in comments below.

There was just a glimmer of news at the event, though it wasn’t surprising or pleasant: The Times’s Web business is falling away, day by day.

Digital head Martin Nisenholtz said revenue at his unit had been OK until the last two months of the year, but that there had been “softness in November, accelerating into December…next year is going to be a different year, by a fairly profound margin.”

Bear in mind that the Times’s digital performance pre-November was grim to begin with–digital revenue grew just 4.3 percent in October–and it becomes possible to imagine that digital revenue will decrease for at least part of 2009.

Nisenholtz didn’t do anything rash like attach any numbers to his comments, but he did add a little bit of color: His About.com unit, which is boosted by cost-per-click/search ads, is still doing OK-ish. But the business of selling display ads to Times Web sites is getting pummeled, and could be “under great stress” next year, he says.

So if About.com is doing (comparatively) well, why not sell that asset to help the paper escape its cash crunch? I asked CEO Janet Robinson that question after the event. She did everything but insist that the paper would never part with About.com, and praised it up and down–“an extremely important part of our digital future,” etc.

But given a couple chances to do so, she never explicitly ruled out a sale. Given the paper’s position, I don’t think she can.

[Image Credit: 1962 NYC Newspaper Strike photo from Life/Google archive)

The details, via a release:

• October, which was terrible, was better than November: “In November, the rate of change in advertising revenue declined from what we saw in October. The entertainment, real estate and automotive advertising categories were especially soft.”
• That $400 million credit line that expires in May? Don’t worry about it: “We have no intention or need of fully replacing the $400 million credit facility expiring next year because our total borrowing under both agreements is projected to be significantly less than $800 million, and currently is approximately $400 million.”
• And that $225 million we might raise by mortgaging our HQ? That’s not a fire sale: “The proceeds will be used to repay existing long-term debt. The building provides a unique opportunity for us to borrow at attractive rates in today’s market.”
  
• Also, would anyone like to invest in our company and/or lend us money? “We are also looking at various other financing alternatives, including revolvers, public offerings or private placements. While the credit markets remain challenging, we expect to secure the financing necessary to meet our maturities when they come due”
• This won’t shock you, but we are going to spend a lot less money on things that aren’t people, paper or ink next year: Capital expenditures will drop from $140 million in 2008 to $80 million in 2009.