Sunday, September 21, 2008

McClatchy CEO Pruitt says more layoffs may be needed

Dale Kasler from the Sacramento Bee lays out McClatchy's grim financial situation:

The McClatchy Co. has slashed its work force by 20 percent, cut its shareholder dividend in half – and might have to trim some more.

In its 151st year, The Bee's parent and America's third-largest newspaper chain is facing "the biggest challenge in the company's modern history," said Gary Pruitt, McClatchy's chairman and chief executive officer.

Like practically every chain, McClatchy is struggling with a media revolution. Its newspapers, where it still makes most of its money, are losing ground to the Internet, though its combined newspaper-online readership is growing. But because of the insanely competitive nature of the Web, McClatchy's own Web sites can't grow their revenues quickly enough to make up the difference, even as their audiences grow.

To make matter worse, McClatchy is deeply in debt due to its $4 billion takeover of Knight Ridder Inc. in 2006, a deal that Pruitt now describes in much more sobering terms than before.

In an interview last week, Pruitt said it's "too early to tell" whether McClatchy made the right move in buying Knight Ridder. He believes the acquisition will eventually work out, but said the debt load – now $2.1 billion – has put McClatchy in an uncomfortable spot. Investors are nervous. McClatchy's stock has fallen almost 90 percent since the purchase was completed.

"It's hard to claim it's a good deal when you see the stock performance," Pruitt said.

I disagree -- it's not too early to call the deal a mistake. When you buy a property nobody else was interested in, that's a major clue you probably paid too much. And in McClatchy's case, went over its head in debt. So now, to deal with declining revenues and crushing debt, McClatchy has been cutting to the bone.

In June, McClatchy announced it would eliminate 1,400 jobs, many through the company's first-ever mass layoffs. Last week, the ax fell on another 1,150 jobs. Staffing will fall to 10,500 by the end of 2008. McClatchy also imposed a one-year wage freeze.

Pruitt wouldn't rule out further reductions.

"It may get worse before it gets better," he said.

The entire article is worth a read. Graphic via Sacramento Bee.


Anonymous said...

Cutting PAST the bone. We're now amputees.

Anonymous said...

The great assumption that Pruitt makes is that advertisers will return to dead tree advertising once the economy recovers.

But with circulation tanking, due to whatever reasons, how are the newspapers going to demand the high advertising prices they once commanded?

It's the prefect storm of economic, marketing, and energy hurricanes that will sink McClatchy.

Anonymous said...

If can't answer these questions, then he needs to be the next to go.

Anonymous said...

so anyone know what current staffing numbers are? if there are supposed to be 10,500 at end of 2008, can do very simple math and determine how many are left to get the axe.

Anonymous said...

Merced lost five.