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The head of the struggling newspaper company is a “walking disaster,” according to Cramer. Need some hard evidence of just how poorly Pruitt has been running McClatchy [MNI
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]? Check out the unbelievable one-year chart of the stock since its acquisition of similarly troubled newspaper company Knight-Ridder last March – MNI is down 82% since the deal.
Granted, McClatchy is in a print industry that is just trying to stay afloat as its hemorrhages ad dollars to the internet. But instead of grabbing onto a life preserver, Pruitt latched his company onto an anchor by buying Knight-Ridder. And that isn’t the only poorly executed acquisition of Pruitt’s career. McClatchy bought the Minneapolis Star in 1998 for $1.2 billion, selling it last December for $530 million – a $670 million loss.
Pruitt’s big mandate at McClatchy has been cost-cutting – it’s why the stock beat by a penny last quarter but that kind of strategy can only alleviate the pain, not eliminate it, Cramer said. And now with Knight-Ridder in the fold, Pruitt’s plan remains the same: combat deteriorating ad revenue by slashing costs. Unfortunately for Pruitt – and McClatchy shareholders – you can’t cost-cut your way out of declining sales.
On Pruitt’s watch, McClatchy took two massive billion-dollar-plus charges in the back half of 2007, reflecting the reduced value of the stock in the Knight-Ridder deal, the lower goodwill value of the company and a decline in intangible asset values, Cramer said. And yet the board just issued a total vote of confidence in Pruitt.
Not Cramer, though. “If Gary Pruitt had been the captain of the Titanic, that would not have been an accident, hitting that iceberg,” he said.
Unless drastic action is taken where Pruitt gets the boot and the company sells off the Knight-Ridder assets, Cramer thinks the stock goes much lower.
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