December 2, 2011

The Financial Times

Thomson Reuters to ‘confront reality’

Tom Glocer’s accelerated departure as chief executive of Thomson Reuters marks “the beginning of the end of a turbulent period of executive change” for the information group, Jim Smith, his successor, has told staff.

The third sudden upheaval in five months left many in the company shaken and its shares down another 1.5 per cent to $26.81 on Friday.  Three-and-a-half years after what had been presented as a merger, Mr Glocer’s former colleagues from the London-listed Reuters have been reminded that the deal was a takeover by Canada’s Thomson Corporation.

Before the deal, Thomson had kept a low profile. David Thomson, the publicity-shy third-generation chairman, had left big decisions to unflashy but focused operators such as Mr Smith, Dick Harrington and Geoff Beattie, the consigliere running the family holding company, Woodbridge.

Headquartered in Toronto and with its western legal business in Eagan, Minnesota, Thomson punched below its weight outside North America.  But by acquiring Reuters, with its global news brand, towers in Canary Wharf and Times Square and a high-profile chief executive in Mr Glocer, “they flirted with having a personality”, one insider said.

This week’s shake-up shows that the Thomsons, with 55 per cent of the group’s shares, see a pressing need to focus on internal operations and, in the words of one person close to the company, to “confront reality” unemotionally.

Their task is to solve stubborn problems with product design and customer service in the group’s financial markets business.  “Tom was not happy” at the prospect of a tough year of restructuring, one former colleague said, accelerating his exit plans by at least six months.

The combination of Reuters and Thomson Financial made no dent in the growth of Bloomberg, its arch rival.  Burton-Taylor International Consulting LLC estimates that Bloomberg’s market share rose from 25.9 per cent in 2007 to 30.8 per cent this year, while the combined Thomson and Reuters share fell from 36.1 per cent to 33.2 per cent.

“The merger of the two hasn’t created something that was more appealing to the market or more competitive with Bloomberg,” said Douglas B Taylor of Burton-Taylor.

Eikon, designed to replace several old Thomson and Reuters systems and go head-to-head with Bloomberg, “has been a big disappointment”, he said.  It was an improvement on previous products but was rushed out with too many flaws.

Mr Smith said pointedly that his priorities were “improving our underlying technology platforms and dramatically improving product quality and customer experience”.

The market in which Bloomberg and Thomson Reuters compete has become harsher, noted Claudio Aspesi of Bernstein Research.  “They found themselves in a crisis – rolling out a new generation of products in the market when the market was shrinking, not growing.  So fighting for market share was all that more difficult.”

Thomson Reuters reaffirmed its guidance for 2011, but its latest earnings suggest that the markets division is still losing share to Bloomberg, which is expected this year to add almost 15,000 subscriptions of $20,000-a-year to the 300,000 it had a year ago.

One person familiar with Mr Smith said: “One doesn’t get the sense he is a visionary, transforming leader but instead somebody who is extremely willing to put in the energy and time required to make the businesses work well.  He is good at nurturing talent and surrounding himself with good management. These are important skills.”

The reshuffle has led to promotions for some little-known allies of Mr Smith, notably David Craig, who has vaulted from leading the company’s risk operation to running all of the financial business.

According to Mr Aspesi, Mr Smith’s new team has one or two quarters to write off any problems it finds.  “The longer he waits, the longer it becomes his problem.  Early next year, we will probably learn of any significant restructuring, lay-offs or any other significant action.”
by Andrew Edgecliffe-Johnson in New York and Salamander Davoudi in London