Thomson Reuters Corp. chief executive Tom Glocer spent the summer moving out some top executives and taking charge of its biggest division himself. The next step: to bring it back to growth.
The company’s markets division – which includes the Reuters news wire service as well as businesses that sell market data to financial institutions, analysts and traders – has stumbled, including a shaky launch of its new Eikon desktop data product. But Mr. Glocer predicts that stronger revenue growth will return by 2013.
“I dove in over the summer, ran it myself … I’m quite confident that I’ve got enough of what the issues were, that the plan we’re implementing to address it will work,” Mr. Glocer said in an interview Tuesday after Thomson Reuters reported a $381-million (U.S.) third-quarter profit.
The markets unit is a key focus for Thomson Reuters; this quarter it accounted for 54 per cent of the company’s revenues. Reports in July suggested that Mr. Glocer was under pressure from the board – including controlling shareholders the Thomson family (whose holding company, Woodbridge Co. Ltd., also owns The Globe and Mail) – to turn the business around.
That plan includes reorganizing the sales force, which Mr. Glocer said had undergone a “badly executed” reorganization plan last year that slowed down the division’s performance.
It also involves greater focus on the rollout of Eikon, a high-end data service aimed at the financial industry. Eikon sales rose 14 per cent in the third quarter compared to the prior quarter.
“The launch [of Eikon]was overly ambitious … the launch plan suggested it was fit to replace the entire desktop product line on day one and it really wasn’t,” Mr. Glocer said.
Mr. Glocer is no longer directly running the markets unit. The company said in late September that Jim Smith, the head of the company’s professional division, would take over as chief operating officer of the entire company. The company also announced at the time that the company is reorganizing its operations under one umbrella with five or six business units.
Revenue in the markets division was up 5 per cent in the third quarter, or 1 per cent when currency changes were factored in. More robust growth in the professional division, which caters to lawyers and accountants, drove 6-per-cent growth in revenue overall. The company reported revenue of $3.45-billion in the third quarter, up from $3.26-billion in the same period a year ago.
Thomson Reuters’ net income for the three months ended Sept. 30 was $381-million, or 44 cents per share. This was an improvement from year-ago profit of $277-million or 32 cents per share.
Expectations were low going into Tuesday’s earnings report, partly because the banks that buy financial data products from the markets division have been cutting costs and laying off some of the employees who use those products. The markets unit also continues to be weak because of “prior management’s poor execution,” UBS analyst Phillip Huang wrote in a research note last month.
The company’s stock price has slid more than 20 per cent this year so far. The stock closed at $29.70 following the earnings report.
“[Thomson Reuters]will need to show improved results in Markets and continued strength in Professional in order to give investors confidence it has solved its internal issues,” Morgan Stanley analyst Suzanne Stein wrote in a research note on Tuesday.