July 26, 2011

The Financial Times

Thomsons Grow Restless Over Reuters Venture

The family behind Thomson Reuters is pushing for faster results from the three-year-old merger of Thomson Corporation and Reuters, which initially exceeded promises of integration benefits, but has struggled to introduce a central new product in its markets division.

People close to the board say the Thomson family, which still controls about 55 per cent of the financial and professional information group through its holding company, Woodbridge, is growing impatient with the pace of change after a year in which shares have fallen by 10 per cent.

The most obvious signs of tension appeared on Friday, when Devin Wenig, head of the company’s $7.5bn markets division, and five other people from his group, left unexpectedly. Mr Wenig had been responsible for Eikon, the new trading platform that has failed to gain traction and received poor reviews.

Tom Glocer, Thomson Reuters chief executive, will now personally oversee the markets division.  This will be a hands-on role that will mark a departure from his previous management style, according to a person close to Mr Glocer.

“The pressure is on him,” said Douglas B Taylor, managing partner at Burton-Taylor International Consulting LLC.  “But he has confidence in his abilities and he’s the man to tackle the job.”

Mr Glocer still has the support of the board and of Geoff Beattie, chief executive of Woodbridge, according to people close to the board.  But a person with knowledge of the situation says Mr Glocer needs to act fast to retain this support.  “I don’t think we can be here in two years,” the person said.  “He needs to turn it around and perform.”

The shuffle at the top of the markets division points to the broader dissatisfaction of Mr Beattie and the Thomson family with the pace of innovation and the deployment of Eikon.

The move also follows other shake-ups across the company this year.  In February, Stephen Adler was named editor-in-chief of the Reuters newswire, replacing David Schlesinger.  The company’s professional division is also being re-organised as it looks to sell its healthcare business.

But the company’s focus is largely on its Eikon platform, which was designed as a rival to the Bloomberg terminal.  Outside observers acknowledge that Eikon was well conceived.  “Eikon is a fantastic idea and if they have time it will go far,” said Mr Taylor.  “It won’t be a Bloomberg killer, but it will reset the bar for Thomson Reuters.”

But deployment of the platform has been marred by poor product integration, cumbersome technology, and a fragmented sales effort. One industry executive familiar with the company said that where co-operation over the implementation of Eikon had been required, there had instead been “territoriality”.

Eikon’s potential and the latest management reshuffles have not yet convinced analysts that the markets division is primed for a turnround.  “We have been sceptical on the prospects of the markets division for some time,” wrote Claudio Aspesi, Bernstein Research analyst, in a note last Friday, adding that he would be revising down already low organic growth forecasts for the division.

The merger in 2008 followed an $18bn bid the previous year by Thomson, the family-run Canadian financial information business, for Reuters.  The Thomson family is still deeply involved in the group, say people close to the board.

 
Last week the company reaffirmed its full-year outlook and gave guidance for its second-quarter earnings, due on Thursday, which should show ongoing revenues of $3.1bn-$3.2bn, up about 4 per cent.
by David Gelles and Andrew Edgecliffe-Johnson