Shareholders to Knight Ridder: Sell or Else!

Knight Ridder may not be the best managed company, or a great place to work. But can another media company do a better job of leveraging its 29 newspapers? This is the assumption behind a challenge by two major shareholders, who want to get rid of 65-year-old Chairman Tony Ridder and either sell the company off to the highest bidder, or break it up.

Legg Mason’s Private Capital Management (PCM), which owns 19 percent of the company, complains in a letter to the board that Knight Ridder is underperforming, even compared to the rest of the newspaper industry. According to PCM, the company has failed to deal with “continuing consolidation among traditional sources of print advertising revenue; the redirection of advertising dollars to other media; its unexceptional operating margins; and its lack of a nationally read paper capable of being leveraged in the online market.” PCM’s complaint has been joined by Harris Associates, which owns 9 percent. Tony Ridder, meanwhile, holds just 1.9 percent.

The specter of a possible bidding war for Knight Ridder has caused the company’s battered stock to do a quick jump. But one assumes that PCM and Harris’ complaints are about more than just a short-term stock boost. The question is why PCM thinks that other newspaper companies would achieve better results.

eBay and Skype: The Classifieds Factor

Some analysts haven’t figured out Skype’s value to eBay. But I see it fairly plainly: classifieds. The classifieds industry appears to be on the verge of a freefall, due to services such as Craig’s List that don’t charge But with Skype in the picture, I see lots of “value add” that buyers and sellers would happily pay for.

Using Skype, which integrates Voice over IP phone and instant messaging, the unadorned text ads may still run free. But Skype potentially adds a lot of value by directly connecting sellers to buyers via Pay-Per-Call, while sending them more in-depth information at the same time.

The integration of Skype also helps close the loop in the transaction cycle. Currently, eBay transmits five million emails a day between its buyers and sellers, mostly for expensive goods like real estate or autos that are “involved” and “complex.” Skype’s instant messaging, voice mail and voice call services are likely to increase the volume of such communications, and also make them more universal.