Quote:
Originally Posted by sandycove
Chips... So what am I missing here? You reckon an $800 million write-down is just a little scratch?
(Footnote: Stock down again after McCain story...)
The value of a business is a reflection of its assets and the present value of future earnings. The NYT has some newspapers it owns. They appear in the books as assets worth what the Times paid for them. The Times paid $1B for the Boston Globe in 1993, but the Globe is worth a lot less today. The write-down brings the Times book value on paper in line with today's reality.
The loss in the write-down didn't happen today, and it wasn't a case of the cost of ink and reporters being greater than advertising revenue. The loss happened when the Times overpaid for the newspapers they acquired. They just realized the loss today.
Newspapers used to have growth and fantastic profits. Now they are shrinking and have above average profits. That change in conditions destroyed their valuations.
In short, newspapers don't lose money, but newspaper owners are losing their shirts.