McClatchy's hubris sealed its doom as newspapers spiral down
When McClatchy Co. (MNI) Chief Executive Gary Pruitt ended his drawn-out fight for rival newspaper chain Knight Ridder, he bragged in his company's press release that "opportunities like this come perhaps once in a company's lifetime." Man, I bet he wishes he could eat those words.
McClatchy, publisher of the Kansas City Star and Miami Herald, today announced plans to slash 1,600 jobs, or about 15 percent of its workforce. The company expects to incur $30 million in costs through the job reductions including severance expenses. It also will also outsource some business functions.
"The effects of the current national economic downturn make it essential that we move even faster to realign our workforce and make our operations more efficient," Pruitt said in a press release.
Shares of Sacramento-based McClatchy are down more than 92 percent over the past year as investors continue to abandon newspaper publishers in droves. Wall Street, though, has even more reasons to be angry with McClatchy because of Pruitt's ill-advised acquisition.
McClatchy won the $6.5 billion boobie prize for Knight Ridder almost three years ago to the day. Pruit's statement underscored the lingering optimism of newspaper publishers who thought that happy days would arrive as long as they could figure out how to integrate the company's print and internet operations. The Sacramento publisher, like every newspaper publisher, has not figured out how to do that profitably.
These days, Pruitt is far more humble. He declined bonuses in 2008 and 2009. Other senior executives are doing the same. They don't deserve any reward considering that the company had a net loss of $27 million last year.
"Today, the company announced that Pruitt's base salary will be reduced by 15%, other executive officers' salaries will be cut by 10%, and no bonuses will be paid to any executive officers for 200," McClatchy said. "In addition, the company ha reduced the cash compensation, including retainers and meeting fees, paid to its directors by approximately 13%."
The future for newspapers is bleak. Gannett Co. (GCI) and the New York Times Co. (NYT) have cut staff in the face of declining circulation and advertising. The private owners of newspapers in Philadelphia and Minneapolis (former Knight Ridder papers) filed for bankruptcy. No buyers have emerged for McClatchy's Miami Herald and the chain's papers in Fort Worth, Sacramento and Kansas City continue to struggle.
About the only hope for McClatchy and the other public chains is for them to go private. Even so, it's hard to see the appeal of the newspaper business has for anyone.