By: E&P Staff and The Associated Press
Media owner E.W. Scripps Co., increasingly focusing on its growing cable television and Internet-based businesses, is taking a hard look at the future of its sluggish newspaper operations. The newspaper division, which used to generate most of Scripps? profits, provided Scripps with 29 percent of its revenue in the third quarter.
Scripps management told analysts at a conference in Las Vegas last week that the company is considering options for its newspaper division and didn?t rule out a sale or spinoff. That news drove Scripps? stock to a 52-week high with analysts saying investors would respond well to some type of separation of the newspaper division from the company?s higher-growth assets.
Late last Friday, Ken Lowe, president and CEO, sent the following message to all employees. It was first posted today at Romenesko at www.poynter.org.
Much has been reported about some comments regarding the Scripps newspaper division that members of the company’s senior management team — including myself — made at an investor conference earlier this week.
I’d like to take this opportunity to provide a little more perspective on what was said. First, let me set the stage.
The comments were made Tuesday during our participation in the annual Citigroup media conference. The format was a fireside chat with Chief Operating Officer Rich Boehne, Chief Financial Officer Joe NeCastro and me. We were answering questions posed to us by the Citigroup stock analyst who covers Scripps.
Early in the discussion we were asked to share our views on the topic of “deconsolidation.” In other words, the analyst who posed the question wanted to know if we would consider restructuring the company in some way that might increase its value to shareholders.
This is a question that we’re frequently asked and, as managers of a publicly traded company, we believe it’s important to be as forthright and as candid in our answer as possible.
With all of the developments in the newspaper industry of late (the sale of Knight Ridder and the Tribune auction process), our response focused on strategic alternatives as they might relate to Scripps newspapers. Our intention was to let shareholders know how thoughtful the company is being about the newspaper business and its future.
We’ve long made it a point, in response to such questions, to let shareholders know that we consider the widest range of strategic alternatives possible with the overriding goal being the long-term growth and sustainability of the company.
If you want to know precisely what was said, I encourage you to listen to the archived webcast of the Scripps presentation at scripps.com. (Go to the shareholders link at the top of the Web page. You?ll find a link to the webcast on the shareholder landing page.)
Now, here?s the reason for this memo. I want to emphasize two important points. First, there has been no decision to sell or separate the company?s newspaper division. Scripps is committed to the newspaper business and continues to be sharply focused on the division’s top priorities of expanding share and building strong local media franchises.
Second, there are no immediate plans to sell specific Scripps newspapers.
Keep in mind, though, that it’s prudent for the company to continuously review the strategic value of our local newspapers as well as our entire portfolio of media businesses. If you look at Scripps over the long term, you know that we’ve added businesses — including newspapers — and divested some. That process will certainly continue.
What didn’t get said at the conference this week — and should have been said — is that in addition to winning two Pulitzer Prizes, Scripps newspapers in 2006 performed at the top of their peer group in generating ad revenue and led the industry in online revenue growth. We’re very proud of their accomplishments.
For all of you, know that we appreciate all that you do for Scripps. Thanks in large part to your efforts, Scripps is widely recognized as one of the country?s leading diversified media companies.
More from AP:
Kurt Funderburg, an analyst with Harris Associates LP, said that he doesn?t see an imminent sale or spinoff of the newspaper segment.
“This is the strongest signal that they?ve made in the past about the possibility of exiting the newspaper business,” he said.
Goldman Sachs analyst Peter Appert estimated in a note to investors last week that Scripps? new media businesses will account for about 64 percent of earnings in 2006, up from 17 percent five years ago. If the newspaper unit is eliminated, the contribution from new media would increase to 82 percent, the note said.
Speaking to analysts at the conference, Joseph NeCastro, Scripps? chief financial officer, said, “I think if you peel it back, clearly the most advantageous route would be to, in some form or fashion, separate the newspaper business from the rest of the business.”
But an internal memo sent later from the company?s senior vice president for newspapers, Mark Contreras, to Scripps publishers emphasized the company?s commitment to its newspaper business and said “There are no plans to sell the division.”
Shares of many newspaper companies have suffered the past few years because of stagnant advertising and circulation growth as more readers and advertisers turn to the Internet and other media.
Some analysts said the comments by Scripps management last week were aimed at reassuring investors that it was aware of the problems with the newspaper industry and was looking at its mix of assets.