This was one of my fav's from a month ago. Maybe we should all email Herb and tell him to buy now...
http://www.marketwatch.com/News/Story/Story.aspx?column=Herb+Greenberg&dist=newsfinder&siteid=mktw&guid=%7BCE6CDEF0%2D55E9%2D48E6%2DAC46%2DA26E3D39A210%7D
March 13, 2006
SAN DIEGO (MarketWatch) -- On a personal basis, Knight-Ridder's $4.5 billion to McClatchy is bittersweet.
As a native of Miami, I was raised on the Miami Herald, considered the flagship of what was then known as Knight Newspapers. I went to the University of Miami on a scholarship from the Herald, where I interned during college.
My first job after graduation was at the Boca Raton News, then Knight-Ridder's (KRI) smallest newspaper -- yet, at that time, probably its most innovative daily.
I later worked at the St. Paul Pioneer Press, the headquarters of Ridder Newspapers before its 1974 merger with Knight. I even used my Knight-Ridder stock, bought at a discount while at the Pioneer Press as part of the employee-stock-purchase program, to pay for my honeymoon. Now, as part of the McClatchy (MNI) deal, the Pioneer Press is likely to be sold to avoid antitrust issues, since McClatchy owns the Minneapolis Star Tribune.
St. Paul won't be the only one to go: Among the dozen Knight-Ridder papers on the chopping block: the San Jose Mercury and Philadelphia Inquirer; in their heydays, both were considered to be among the best U.S. newspapers. That was before Knight-Ridder went on a cost-cutting spree in which it excised muscle as well as fat.
The good news, from a journalist's standpoint, is that the remaining Knight-Ridder papers are going to a chain known for good journalism.
The bad news: that it had to come to this.
But that's the reality of newspaper publishing circa 2006. A year ago I wrote that I'd love nothing more than to invest in a mutual fund that owns nothing but down-and-out publishing stocks -- just as I did with biotech several years ago when it was like the plague. Newspaper stocks were so hated they appeared to be the ultimate contrarian play.
Now I'm thinking I'm lucky no such fund existed. (Yet another case of being saved from myself.)
Despite their strong cash flows and brands, newspapers, in reality, have continued to struggle to expand revenue. No need to hash over all of the obvious reasons, but let's just say that when my daughter recently looked to rent an apartment in downtown San Diego, her first stop wasn't the San Diego Union Tribune's classifieds; she headed straight to Craig's List, where she found a condo unit being rented out (not surprisingly) by someone around her age. Granted, even before the Internet became renters' primary source, niche publications had eaten away at that market for years.
Still, it's no wonder that the stocks of chains I mentioned in that year-ago column, including the likes of Tribune (TRB
TRB) , are sharply lower than they were then. Knight-Ridder, in fact, is only back to year-ago levels because of takeover talk.
Even the deal price of $67.25 is just a point or two above where Knight-Ridder was at the time. While that marks a roughly 30% premium over Knight-Ridder's October 2005 trough, before its shareholders started agitating for a transaction, news of the deal has done little to jumpstart other newspaper stocks.
That's perhaps the most troubling part of the story: No matter what happens in this space, short of rising revenues, investors want to treat newspapers -- cash flow or no cash flow -- as yesterday's news.
The only bright spot, for now, for media-stock believers is that I have been known to throw in the towel at exactly the wrong time, which means my newfound pessimism on the group may be the best sign yet that the bottom has finally arrived.
ROFL!