The Silicon Valley “bubble burst, but Silicon Valley has come back. The Mercury News, however, has not.” That’s how the New York Times put it in a story this morning (March 20) about McClatchy’s stunning decision last week to buy Knight Ridder but sell off several of its newspapers including the Merc, Contra Costa Times, Palo Alto Daily News group and Monterey Herald.

The story, by Times staffer Damon Darlin, says McClatchy decided not to keep the Merc because of its high operating costs — it has a profit margin of 9% versus 12% for other Knight Ridder papers. The Merc’s annual profits are estimated to be $22 million a year on revenues of $235 million.

The story recounts some of the pratfalls at the Merc over the years, such as its short-lived San Francisco edition. The Times points out that while the Merc was busy developing its web site and covering the tech boom, it missed the Craigslist phenomenon which has drastically reduced the paper’s revenues. The Merc’s revenue from help-wanted ads has fallen from $118 million to $18 million a year. The newsroom has gone from 404 people to 280 — a 30 percent decline.

Editor Susan Goldberg (pictured) tells the Times that the paper’s story is like many of the businesses it has covered. But Publisher George Riggs paints a more optimistic picture, saying employment in the region is back to where it was before the dot-com crash and tech execs are exercising stock options and pouring cash into the local economy. What’s more, the Merc is predicting that circulation — which is off by more than 15 percent — will soon increase for the first time in six years.