In the last few years, we've seen many examples of how traditional content and media companies have been buffeted by the challenges of the Internet, and how they have had to shake up their businesses and embrace new models to stay competitive in the information delivery business. Companies that didn't move fast enough or far enough were criticized and punished both by users and by investors. Reuters Group, PLC, the global financial information and news company, is one that has been criticized for its tentative and indefinite Internet strategy.
On February 8, in conjunction with the report of its year-end results, Reuters announced a range of major initiatives designed to accelerate its use of Internet technologies, open new business markets, and migrate its core business to an Internet-based model. Reuters reported a 10.6-percent increase in net income for 1999 over the previous year. Reuters now plans to spend about $800 million over the next 4 years on this Internet migration.
The company also detailed plans for partnerships, spinoffs, organizational and management changes, and Internet portal development aimed at the individual investor, all geared to greatly expand its market reach while achieving cost savings for the company. Analysts and investors were relieved to hear the definitive statement of plans and sent the stock price to a record level. Time will tell how users and new markets react to the initiatives. The traditional markets for sales of information products have seen only sluggish growth (or decline), so the potential for a much wider global base of users looks attractive indeed.
Peter Job, CEO of Reuters, said: "The Internet has opened up two big opportunities for Reuters. It has enabled us for the first time to start serving an infinitely wider market, including individuals making financial decisions at home and at work. We estimate that more than 40 million individual users are now looking at our information on 900 Web sites. It has also allowed us to adopt a more cost-effective model for our base business. The Internet recognizes no frontiers and points towards a single global product range which is cheap to deliver, administer, and maintain."
Reuters plans to fund the new projects by preparing an initial public offering (IPO) of a portion of its Greenhouse Fund, in order to "build on the success of the Fund at a faster pace," according to the announcement. The Fund has invested over $100 million in 38 technology and Internet companies, including Yahoo! and Infoseek. Twelve of these have gone public and now have an estimated worth of over $500 million. The company is also considering a number of strategic options for its Instinet subsidiary brokerage, one of which is an IPO.
The company has now organized into three business areas, Instinet being one. A second is Reuters Financial, comprising two divisions: Reuters Information (RI) and Reuters Trading Solutions (RTS). RI is being expanded to include the Global Sales and Operations unit. RI is the division that oversees the Reuters Inform e-commerce product that provides real-time news and information on the Internet. (See the Oct. 18, 1999 NewsBreak, "Reuters Launches New Internet-based News and Information Services.")
The third company unit, Ventures, is charged with development of new businesses outside the core financial markets, including any new portals or consumer strategies that Reuters decides to deploy. Ventures is being renamed Reuterspace, "to reflect the bringing together of businesses operating in new areas." Reuterspace includes Reuters Media, Reuters Enterprise (for the business-to-business market), Reuters Personal (for the retail finance market), Reuters Mobile (created last year to galvanize technology and the market for mobile access to data), Reuters Greenhouse, and Reuters Partners (to work with companies like The TowerGroup and Venture One, which were acquired and operate independently). Reuters Business Briefing became part of the Factiva joint venture with Dow Jones in July 1999.
Reuters will build a new financial portal for the consumer finance market. The company also announced a number of joint ventures that extend its reach providing news and financial data. It will form a new venture with Aether Systems, a wireless applications provider in the U.S., to provide custom wireless solutions to the European market. Another joint venture just announced, with Multex, will create a Web site for private European investors. A week earlier, Reuters had announced a joint venture with Equant, which will create a closed, secure financial extranet for linking business e-commerce users.
Reuters has always been a complex company to follow, even before this move to reinvent itself as an Internet company. It is a huge global operation with about 17,000 employees and a market capitalization of about $30 billion. For serious business information users, it has been an increasing challenge to figure out exactly what Reuters information we were retrieving, when it had been updated, and how content differed from various services and sites—though we welcomed the easy access and free availability on many Web sites. Now, with Reuters information on 900 sites and growing, it will likely be impossible to know what we're getting. But, the end-users and individual investors looking for financial information should love it.