Reuters, the gentleman of international news journalism and a by-word for integrity, has had a large hole shot through its reputation. One of its subsidiaries stands accused of industrial espionage – stealing key computer coding from its rival Bloomberg. A criminal investigation is underway in the US.
For a company which lists “goodwill attached to the Reuters name” as one of the company’s non-quantifiable assets in its annual report and accounts, this is particularly bad news. Partly as a result of poorer performance, partly because of the rise in the value of sterling, the information group has also just posted a four per cent drop in annual profits.
But, more worrying in the long term, is another accusation being levelled at Reuters – that the 146-year-old is standing still, while Bloomberg, although a fraction of the size of Reuters, with 1996 sales of $918m (574m) compared with Reuters $5bn, is dynamic.
The list of competitors straining for market advantage in information provision has grown to include MAID, Bridge-Knight Ridder, Nikkei and Dow Jones, as well as countless local equity information providers. As Reuters offers more Internet services, so the field of competitors will increase. Rumours that the mighty Microsoft is looking for an entrance into the media market continue to abound.
US analysts have criticised Reuters Holdings chief executive Peter Job for lacking a clear and creative vision for the company, pointing to the numerous share buy-backs ordered by Job as evidence of a lack of strategy. He is merely resorting to returning money to shareholders, they say.
Bloomberg is busy diversifying into new areas – radio and the Web, for example. Last month, it launched a new consumer personal finance magazine called Bloomberg Money. Last year, it set up a high-profile deal with The Independent on Sunday. Bloomberg provides the paper’s business news and the pages are branded with the company’s name.
Rumours that founder Michael Bloomberg was to launch a rival to the Financial Times in conjunction with The Mirror Group have so far come to nothing, but show it is Bloomberg – rather than Job – who is bending the ears of top media executives.
Bloomberg, who has penned an autobiography, has been quoted as saying: “You can make as many movies as you want about two lovers in the North African desert during World War II, but the guy who owns Rick’s Bar in ‘Casablanca’ still has something which you cannot duplicate.” This gives some insight into his personality and business perspective. When Job was asked in an interview whether he would write his memoirs, he replied: “I lack charisma for such a task.”
But a business does not fire solely on the personality of its head. Reuters is still the world’s largest electronic publisher, supplying real-time financial data, news, news pictures as well as number and text databases. The data is gathered from a network of 2,000 journalists, photographers and cameramen working from 174 bureaux worldwide. Around the world, 360,000 computers receive this information.
Analysts are unconcerned by the Bloomberg fracas. Panmure Gordon recommends Reuters shares as a “buy”, saying: “We are strong believers in Reuters’ market position and strategy.” It regards the massive 1.5bn share buy-back, which takes effect this month, as a positive sign of the company’s financial buoyancy.
However, Panmure sounds the caveat that short-term growth will be curtailed by client base consolidation, Far Eastern market turmoil and millennium costs and that the Bloomberg case will overhang the share price.
Job has said he will continue to focus on organic growth rather than acquisitions. He has also cut his overall marketing budget. Selling, marketing and administrative expenses declined two per cent in 1997 to 664m, compared with 13 per cent growth in 1996.
Last year, BMP DDB won a four-way battle to pick up the 15m Reuters worldwide advertising account. At the time all Reuters would say about the appointment was that it wanted to strengthen its position as one of the forerunners of IT in order to fight off competition. To date, no campaign has materialised. No one from BMP was available for comment and Reuters says merely that it is still reviewing its options.
Reuters is introducing new products, however. Last year, it launched Millennium Challenge, a global communication campaign to give customers details of plans to ensure products continue to perform beyond the year 2000. It also introduced a new range of products aimed at providing financial information to wider audiences through their intranets.
In December, a website was set up with comprehensive sports news from Reuters and hardware provided by Digital. Reuters manager, corpor ate communications Adrian Duffield says: “SportsWeb has been incredibly successful. We are one of the few companies making money out of the Internet.”
The fiercest battle ground, and the field where Bloomberg has most troops, is in the US. Job says that expanding Reuters’ presence in the US market is his number one priority. The court battle will only make Job’s task harder.