Reuters Makes Waves with Losses, Cuts and an Acquisition

After reporting a larger-than-expected net loss of over $630 million for 2002, Reuters announced intentions to cut 3,000 jobs over the next three years. Those cuts come on top of almost 3,000 cuts already announced and will be focused mainly in the development area, says Tom Glocer, chief executive of Reuters Group. The strategy will bring together costly, separate development centers, concentrating development within a new onshore, offshore model.

"Currently we're far too fragmented in the number of development centers we operate," says Glocer, adding that this is not only costly and inefficient, but it compromises time-to-market for products and services. Regardless of cost and staff issues though, Glocer emphasizes the need to bring the number of development centers down and co-locate people in metropolitan areas in the U.S. and abroad.

"We've been building up our development center in Asia where we can in-source to our own facility," explains Glocer. "The morale is high there, especially when they see more and more work coming in so it's a high quality, cost efficient strategy and we keep the know-how in-house."

While cutting back and streamlining its development operations, Glocer says that Reuters will be beefing up its customer-facing staff, particularly in the areas of training and help desks. The company has deployed Siebel CRM technology across all of its help desks for 24-hour a day capabilities. "We're focused on this and the end result is going to be significantly enhanced customer service and lower cost of ownership with fewer communications networks and commonality across data feeds and things like that."

Instinet, the electronic-trading system that Reuters owns more than half of, is responsible for a large portion---$112 million---- of Reuters' 2002 loss. Glocer explains that while the bottom-line loss for Instinet caught quite a bit of attention, most of it was related to goodwill, created by Island and other acquisitions. He says that while Nasdaq volumes have been down, Instinet has still seen a 30 percent increase in market share over the past year, only 10 percent of which is from Island. "Competitively it is doing well," says Glocer, "But overall Nasdaq volumes are down and what Instinet has been doing is cutting the cost base to reach profitability therefore when volumes pick up, Instinet is going to be in good shape."

But in the meantime would Reuters consider a sale of Instinet? When asked about the possibility, Glocer would not comment directly, but says that the board did not hesitate to undertake a value-adding deal such as the Island acquisition and would therefore obviously evaluate any other opportunities that made sense.

Reuters also announced its acquisition of Multex this week and is already touting the complimentary service offerings the deal will bring to the table. "Reuters is about to begin a real information company, we happen to be good with technology, but it is in support of the information," says Glocer. "We're great with news and securities-level pricing, but I don't think we've produced enough company fundamental data ourselves, so this will be a big help there."

Reuters also looks to leverage the research aspect with the Multex acquisition, says Glocer. He adds that Multex has the connections to the sell side, buy side and individual investors already in place while Reuters has the established branding and its own content management systems to combine for a comprehensive offering.

"It's a perfect fit with these industry issues of how to deal with conflicts of interest and independent research," he says. "A straight-through-electronic process for the creation and distribution of research." The deal, valued at approximately $195 million, is expected to close by the end of March.