Two investment firms unhappy with the trajectory of The New York Times Co. said in a regulatory filing yesterday that the company should focus on its "core assets" and build its digital holdings, sending the stock up 9.6 percent.
"The greatest threat to The New York Times is the continued diminution of its business model and destruction of shareholder value," wrote Scott Galloway, founder of Firebrand Partners, in a letter filed with the Securities and Exchange Commission. "We believe a renewed focus on the core assets and the redeployment of capital to expedite the acquisition of digital assets affords the greatest shareholder appreciation and creates the appropriate platform to compete in today's media landscape."
Firebrand has partnered with Harbinger Capital Partners - which on Friday notified Times Co. it would nominate four new members to its board.
Firebrand, a New York activist investment firm, and Harbinger, a hedge fund, jointly own about 4.9 percent of Times Co. stock. The panel they intend to nominate has expertise in Internet media and brand strategy.
A person briefed on the firms' strategy said Times Co.'s current portfolio should be reevaluated, since the stock has been on a downward spiral. The stock closed yesterday at $16.07 a share, down about 30 percent from a year ago.
The person did not specify which properties were "core," but questioned what the common thread is in a portfolio that ranges from mid-town Manhattan real estate to the Red Sox to newspapers.
In addition to The New York Times newspaper, Times Co. owns various other newspapers, including The Boston Globe and the Worcester Telegram & Gazette. Times Co. also owns various assets such as the Internet site About.com and a 17 percent stake in New England Sports Ventures, which owns the Red Sox baseball team and a majority interest in New England Sports Network.
Analysts speculated that Galloway's reference to "core assets" meant products strongly associated with The New York Times brand.
"What amounts to core assets is in the eye of the beholder," said newspaper analyst John Morton. "The company considers all its newspapers to be core assets - they're in the newspaper business. I suspect these investor types wouldn't see these small-town newspapers as core assets - and perhaps not even The Boston Globe."
Times Co. spokeswoman Catherine Mathis said the company does not make a distinction between "core" and "noncore" assets.
"We regularly have detailed discussions on these kinds of strategic issues with our investors and our board regularly reviews our portfolio," Mathis said in a statement. "As always, we remain open to ideas from and dialogue with our investors."
A Globe spokesman said the company does not comment on corporate matters, and the Red Sox had no comment.
Galloway in the letter stressed the firms' intention is to work in "a spirit of cooperation." The Sulzberger family controls nearly all of the voting shares of Times Co., giving the family the power to appoint nine of the 13 members of the board.
Morton said that without family support, the activist efforts would not succeed. But in 2006, Firebrand and Harbinger Capital launched a similar campaign at Gateway Inc., and today Galloway sits on the board of the computer company.
Firebrand and Harbinger's nominees to the Times Co. board are Allen Morgan, managing director at the venture capital firm Mayfield Fund; James Kohlberg, cofounder of the private equity firm Kohlberg & Co.; former AOL executive Gregory Shove; and Galloway, a clinical associate professor at New York University's Stern School of Business and cofounder of the gift retailer RedEnvelope.
"I would guess, if someone were to really think about the essence of The New York Times and its opportunities, it probably doesn't have a lot to do with their New England strategy," said Lauren Rich Fine, a longtime industry analyst who now teaches in the communications department at Kent State University. "Their real brand is The New York Times newspaper being viewed as a national franchise."
Carolyn Y. Johnson can be reached at cjohnson@globe.com.
