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.
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.