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Jim Cramer Blog
Lack of Financial Acumen Burns Papers
By Jim Cramer
RealMoney.com Columnist
4/2/2007 9:41 AM EDT
URL: http://www.thestreet.com/p/rmoney/jimcramerblog/10348006.html
Why are almost all newspapers so poorly run financially? Why did Tribune (TRB) borrow money to buy back stock so high? Why did The New York Times (NYT) do the same thing, too? Why did Knight Ridder buy back stock endlessly -- sometimes at much higher prices, too?
This pattern is particularly unnerving because all of these companies are so challenged in their basic businesses. They could have spent to build up Web operations. They could have created their own sites to keep the value to the companies. But instead they all tried to develop Web companies that could come public. They didn't get there in time to beat the closing of the IPO window.
Tribune was particularly egregious. This company never did anything Web-wise, with management endlessly thinking that its stock was undervalued. It was clearly overvalued, and now the upside is totally capped. The little amount that Sam Zell is putting up to take this company private shows how little these companies are really worth.
All of these companies seem to be run, frankly, by jokers or dreamers who had no idea how to deploy capital. The only explanation I can think of is that they were run by people who are up from the newspaper side or are heirs to the founders and had no idea what they were doing financially. Dow Jones (DJ) was like that for years, and it is finally being run in an intelligent financial way. Probably too late, though.
These are diminishing assets. They don't need to exist. Younger people rarely read them. And the companies acted like they would always be in demand and were simply misunderstood by Wall Street. Nope, Wall Street got it the whole time, except a couple of hedge and mutual funds that are trapped and trying to get managements to do something to bring out value.
The result? The Philadelphia Inquirer gets wrecked. The Times boosts the dividend well beyond its means. And now the Tribune sets the stage for a massive downsizing, massive firings and the inclusion of tons of Associated Press copy.
Great. Just great.
But they can tell us all what's best for us, our money, our taxes, our society, and our everyday life.