TOM Ryder is making all the right moves.
Hired last spring to rescue a failing Reader’s Digest, the former AmEx exec has undertaken a massive restructuring and cost-cutting.
Now it turns out he’s also been exploring various strategic deals that could link his company with Time Warner or Hearst.
The company’s stock has been on a roller coaster, dropping from 28 to 17, and now back up to 27 since Ryder took over. He has every reason to keep the stock up.
Ryder stands to pocket some $10.2 million over his four-year contract if he can improve the company’s shares by 8 percent a year.
He has hired solid new managers, brought on independent directors, and taken a knife to the company’s budget. He did well to sell about $90 million worth of corporate art, and is moving toward the sale of $100 million worth of real estate.
Plus, he’s on track to take $350 million out of the company’s annual budget.
But even all that progress doesn’t mean Ryder’s out of the woods yet.
“It’s too soon to get excited about the stock,” said Peter P. Appert, an analyst at BT Alex. Brown. “Ryder is smart and pro-active in trying to get the problems fixed, but there are some fundamental problems.”
In particular, Reader’s Digest has an aging database of customers, and has trouble moving its products.
By creating a joint venture, especially with Time Warner or Hearst, Ryder could take massive costs out of his operation, and bring some young readers into the company’s aging database.
In the deal with Time Warner that’s under discussion, Ryder reportedly would still run the business, but with the backing of Time Warner’s powerful magazine and direct-marketing operation.
A joint venture also would remove the company from the control of the charitable funds that have been hampering progress – the DeWitt and Lila Acheson Wallace trusts. The trusts, major contributors to important New York cultural institutions, would be in more reliable hands.
If the joint ventures falls through, Ryder will be put to an even tougher test. He is scheduled to outline his plans for increasing revenues if the company goes it alone, in a meeting with investors Feb. 25.
He’s apt to announce new initiatives like plans for cheaper distribution, using the Internet, and global expansion.
Some are confident he’d be just fine on his own.
“If he can’t get the price he wants, we have complete faith in his ability to get the upside he wants,” said Marc Andersen, of Corporate Value Partners, a big Reader’s Digest investor that was highly critical of the company’s previous management.
Finding a strategic partner, said Appert, “may be a more compelling way to go.”
Either way, Ryder has gone a long way toward making the legendary magazine and direct-marketing business viable again.
A year ago, the company was at war with investors.
Now its harshest critics, the board of directors, and the trusts that control the company, are on board.
“We’re very happy with Tom, and all the moves he’s made,” said Andersen.