Jun 25, 2012

How six bad Fairfax calls cost shareholders almost $4b

Fairfax executives and board members have sat back and watched more than 80% of the value of the company evaporate.

Adam Schwab — Business director and commentator

Adam Schwab

Business director and commentator

Despite the masses of column centimetres devoted to the machinations at Fairfax since Greg Hywood’s company-transforming announcement last week, no one, especially no one writing at Fairfax, has explained exactly what went wrong at the once-fine instruction. While much focus has been given to the drying up of Fairfax’s “rivers of gold”, it was the company’s continued digital failures and foolhardy offline acquisitions that have been the main reason for Fairfax’s share price dropping from $5.30 to only 58 cents.

Fairfax executives and board members have sat back and watched more than 80% of the value of the company evaporate. To compare — in 2005, Gina Rinehart was worth $900 million and Fairfax was valued at about $7 billion. So Rinehart could have used all her wealth to buy less than 13% of Fairfax. She can now afford almost 30 Fairfaxes.

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4 thoughts on “How six bad Fairfax calls cost shareholders almost $4b

  1. paddy

    Even allowing for “the benefit of hindsight” factor, that’s a truly amazing series of management blunders.

  2. Winslow Rory

    The analysis of the Rural Press merger is pretty flimsy economics.

    It looks at the rural newspapers as if they’re a separate entity and does not take into account the fact the entire company’s value has deflated since the merger.

    This article simply says that Rural Press is now worth about a third of what Fairfax paid for it. But could this actually be viewed as a good business move, considering that the entire company has deflated to about a 10th of its worth at the same time?

    Or, to put it another way:

    The rural and regional newspapers make money. The metropolitan newspapers don’t.

    It would be fair to argue that the only thing keeping the SMH and Age afloat has been the dedication of print readers in regional markets.

  3. Ron Lee

    Crikey needs to publish more history like this. People forget.
    It is especially relevant when one of those responsible for the fiasco is still there as Chairman!

    A more detailed study of the Chairman’s CV is illuminating as it highlights his term as CEO at Woolworths operating in an duopoly with a lame competitor whose Board was so incompetent that for years they could not manage to appoint a CEO who was simply honest and had Australian retailing experience. i.e. Brian Quinn, Dennis Eck and John Fletcher. No wonder Corbett looked good in comparison.

  4. Dogs breakfast

    Adam would no doubt be able to tell us approximately how much money these CEO’s, Directors and Chairmen took out of Fairfax while they were fiddling, that might really make a few teeth grate.

    It was always difficult during the early tech years to know what was going to work and what wasn’t, and it is easy to criticise in hindsight, but there is a strong argument to say that Fairfax should have been all over seek and carsales as a defensive play, i.e. if they were successful and cannibalised the rivers of gold then they would benefit from that side as well.

    And given that Fairfax totally pwned the job ads and to a lesser extent the car sales industry, and might I say charged like wounded bulls for the privilege, they might have made an ever greater success of those two ventures by aligning them with their print business.

    Again, it’s much easier in hindsight, but these people utter the word ‘strategic’ whne they are talking about breakfast decisions, but real strategy is much harder than what the corporate and academic worlds put out. There are more management consultants doing ‘strategy’ at exorbitant fees than you can poke a stick at, but the number of examples of companies who have been ‘successfully strategic’ seem to be able to be counted on one hand.

    And that’s not just the media, it runs through the banking system, big industry, the incredible blunders of the big miners, god knows it’s not likely to be the end of it either.

    But they’ll still pull down those alarmingly large pay packets.

    For what exactly????????

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