Analysts: 'Boston Globe' Guild Ability to Negotiate a Better Deal Unlikely

By: Jennifer Saba The Boston Globe guild's hardball tactics yesterday will probably not pay off, according to Wall Street analyst.

On Monday night, members of the guild of the Boston Globe narrowly voted down plans to save the paper $10 million through an 8% pay cut, unpaid furloughs, and other reductions in benefits. The New York Times Co. said it is going to push through a pay cut of 23%.

Wachovia Senior Analyst John Janedis thinks the guild's hope to negotiate a better deal is "remote," he wrote in a note released this morning.

The New York Times Co., which operates the Globe, is set to loose $85 million on an operating basis. The plant closures, reduced compensation and increased circulation revenue should help but not enough. The paper is on track to lose a "significant amount of money this year," Janedis wrote.

"While the potential closure of the paper may be viewed by some as a negotiating tool, we think ongoing double-digit ad revenue declines and labor issues could make a hybrid print/web edition a reality, ultimately leading to significantly more job losses," the note said.

Janedis concedes if the New York Times can't move towards break even, a dramatic reduction or outright sale -- though unpopular -- will be positive for equity holders.

Noted newspaper analyst John Morton believes the New York Times will likely push through the proposed 23% pay cut. "I think the union made a mistake turning it down," he said, adding that if it goes to a hearing the union is likely to loose more than gain anything.

Morton also cautions Globe employees against wishing for new management. There are scant few buyers in the market for newspapers and even if a group of Boston locals step forward, they will be forced to make huge cuts. "If they guild thinks 23% is draconian, they will be amazed with how few of them will end up with jobs" if there is a new owner, Morton said.

However, Morton doesn't believe the New York Times will actually shut down the Globe. "Heavens, no. I don't think that would be one of the options. The last thing the Sulzbergers want to be remembered for is closing down one of Boston's preeminent papers."

Benchmark Co. Managing Director Ed Atorino is scratching his head over the guild vote. "I don't understand what they hope to accomplish," he said. "In this situation" -- the decline in revenue at the New England Media Group -- "unions are sort of powerless."

The Street, so far, is indifferent. In early afternoon trading, shares of the New York Times (NYSE: NYT) are trading down 19 cents to $6.15.