Wednesday, June 07, 2006
Bold strategy to shape Tribune chief's legacy
By Phil Rosenthal
Published June 4, 2006
FitzSimons thrust into media world spotlight
With his silver-flecked hair and neatly trimmed mustache, Tribune Co. Chairman, President and CEO Dennis FitzSimons has the look of media maverick Ted Turner.
We're about to find out if he has Turner's vision.
These are tough times for all traditional media companies, and Tribune Co. is at its own crossroads. To stir a stock that's lost around 40 percent of its value over the last two years, FitzSimons last week unveiled a major initiative to buy back a quarter of Tribune's outstanding shares with borrowed cash.
The price tag of at least $2 billion will be offset in part by the sale of at least $500 million in non-core assets and $200 million in cost cuts over the next two years.
This strategy, meant to stand as a testimonial to the company's confidence in its own value and expected performance, is easily Tribune's boldest move since FitzSimons took its top job in 2004 and the best evidence to date of his vision of and for the company.
As such, its repercussions inevitably will shape his legacy.
"We're trying to run our existing businesses, which have had a difficult growth period, more efficiently while still maintaining quality and relevance in our individual local markets," FitzSimons, who turns 56 this month, told investors in a conference call after announcing the new stock plan Tuesday.
"We're doing it by investing in technology, so we're making capital expenditures and trying to create efficiency by using the size of our group," he said. "It says nothing about our view of the future other than we're in a changing business and we feel we need to get out in front of it.
"To this point, FitzSimons has had to negotiate more than merely the minefields common to all traditional media businesses, fending off newcomers for ad money and consumers and countering Wall Street skepticism about long-term growth potential.
Tribune has had a few traps uniquely its own, many stemming from its 2000 $8 billion purchase of Times Mirror Co., operator of the Los Angeles Times and other papers.
These include an inherited $1 billion tax dispute between Times Mirror and the Internal Revenue Service that Tribune lost last year. Another setback was the revelation two former Times Mirror papers--Newsday and Hoy in New York--inflated circulation figures.
"Some of the specific problems that have impacted Tribune, we feel we're making progress on and that's why we're making this step at this point," FitzSimons told investors. "We think our revenue prospects are going to improve. We have to make that happen. Our goal is to underpromise and overdeliver.
"But beyond those specific issues, there has been a slow-to-settle culture clash of two institutions each more than a century old, one headquartered in Chicago and the other formerly rooted in Los Angeles, yet often seemingly separated by more than the 2,000 miles between home bases.
For Tribune to realize the efficiencies necessary to reach $200 million in savings will require more cooperation than ever between its papers and television stations.
"The premise that there are areas where we can collaborate further is a really important opportunity that we've made lots of progress on," Scott Smith, president of Tribune Publishing, said in an interview. "We believe we can build on that in our newsrooms, but there are also similar opportunities in advertising and circulation.
"Although part of Tribune's plan is to run lean and sell some assets, it is not emulating more radical moves of other media outfits that re-thought their "big is best" philosophies. As Viacom kingpin Sumner Redstone declared last year as he moved to undo his company's empire building of previous years, splitting in two: "In the 21st Century, large is no longer in charge.
"Knight Ridder, No. 2 in U.S. newspaper circulation, was pressured by big shareholders to put itself on the block to pump up its stock price. The subsequent $4.5 billion sale earlier this year to McClatchy failed to produce the windfall for which optimists hoped.
Whether that clouds prospects for Tribune selling papers it doesn't consider core assets remains to be seen. But it's more likely to find buyers for TV stations in towns such as Albany, N.Y., should it decide that makes sense for a company with a big-city agenda.
So far, only assets in the top three markets--New York, Los Angeles and Chicago, including this newspaper and the Chicago Cubs--have been deemed untouchable. Meanwhile, FitzSimons has talked about buying a greater interest in the successful jobs Web site CareerBuilder.com.
Tribune management has declined to specify which assets are expendable, causing some anxiety internally.
To combat that, FitzSimons on Friday staged a "town hall meeting" for the benefit of the company's 20,000 or so staffers, answering questions about the strategy and its ramifications.
But he announced at the start that what he and his top lieutenants said therein would be off the record, a curious move for the head of a company that--for now at least--owns 11 daily newspapers, 26 television stations, a radio station, several Internet sites and various other media entities all dedicated to communicating with the public at large.
Sources within Tribune Tower say that when he was asked what targets the company's various businesses need to hit for this latest maneuver to be considered a success, FitzSimons referenced the price of Tribune stock. If sufficient growth is shown, he reportedly said it's hoped the price will be up to $50 a share by 2010.
A Tribune spokesman declined to comment on the remark, saying the meeting was meant as an internal briefing.
Steve Mosko, president of Sony Corp.'s television studio who has known FitzSimons since the 1970s and now does business with Tribune, says FitzSimons is "a good man and a smart man, who's trying to do the right thing.
"Some who work and have worked over the years with FitzSimons, a one-time TV ad salesman who rose through Tribune's broadcasting ranks, consider him a well-intentioned micro-manager.
He's described by friends as someone who shuns the spotlight, at least by the high-profile standards of the media business. But now he's clearly front and center.
"There's a lot of uncertainty surrounding traditional media these days as investors are unsure about future growth," FitzSimons told employees in a video message announcing the buyback. "They're staying away from the media sector, and that has had a negative impact on our share price. Because we believe in the future of our businesses, instead of borrowing to buy assets of other companies, we are buying our own assets at what we consider to be a discount.
"Where his vision takes Tribune, the whole media world is watching.