BUSINESSWEEK ONLINE : JANUARY 22, 2001 ISSUE
COVER STORY

The Financial Times Takes On the World


Richard Lambert, editor of the Financial Times, sweeps a pile of papers off his table and shows a visitor the magnificent view of the Thames outside the window of the FT's newsroom, perched on the river's south bank. The 56-year-old seems full of good cheer. And why not? Only five years ago, the outlook was bleak for the FT. Now, he's presiding over one of the world's fastest-growing and most profitable newspapers. ''We have the freedom and resources to invest in expansion in a way we didn't have before,'' Lambert says.

The FT has been on the move since 1997, when Marjorie Scardino, CEO of parent Pearson PLC (PRSNY), announced an ambitious worldwide expansion. Since then, overall circulation in the English-language editions has risen from 300,500 to 476,000. The paper has made a big push into the U.S., beefed up its European offering, and started a German edition, FT Deutschland. Less successful has been a $150 million investment in an online edition, FT.com.

Scardino's timing couldn't have been better. The expansion coincided with an economic boom and a growing appetite for sophisticated business news. Now, of course, economies worldwide are slowing, and ad sales at many financial publications are taking a hit. Still, Morgan Stanley Dean Witter figures the FT newspapers earned $129 million in 2000, up 53% over 1999. The New York office took in about $80 million in ads last year, 60% above the previous year.

Robert Thomson, 39, a former Beijing and Tokyo correspondent, took over as U.S. managing editor after Lambert, who ran the paper from New York for almost two years, returned to London at the end of '98. Key to taking on The Wall Street Journal in the U.S. was $100 million spent to arrange printing at six locations and on a direct-mail subscription drive. Thomson boasts of the FT scooping the Journal on such choice stories as Switzerland's UBS taking over PaineWebber Inc. in July. The Journal is best at covering ''midsize companies doing middling deals in the Midwest,'' he says, while the FT is capturing the more lucrative market for global business reporting. ''It's a Lexus-Taurus thing.''

Of course, the FT is making a virtue of necessity. It lacks the staff for a full-scale assault and so is going after selected stories. The Journal, with 1.8 million U.S. circulation, remains dismissive of the upstart. The FT in the U.S. is ''not a factor,'' sniffs an executive at Dow Jones & Co., the Journal's parent. ''It is sort of a fashion accessory.''

In February, 2000, the FT stormed another foreign fortress, launching FT Deutschland with Bertelsmann, which now has a circulation of 65,000. If FT Deutschland succeeds--Pearson plans to spend $45 million over three years in Germany--Scardino will have assembled a powerful network of business dailies across the Continent. The Financial Times Group also has Les Echos, the leading French financial broadsheet, and Expansion, the leader in Spain. Lambert says the FT's next move is to bolster its Asian edition, which has only 20,000 circulation.

Pearson's efforts to build a global Web portal around the FT have been less than stellar. The idea is to provide news supplemented by financial-data providers such as MarketWatch.com, of which Pearson owns 34%. But FT.com, suffering from ineffective marketing and technology glitches, has been bleeding red ink. ''It was a mess,'' says a Pearson executive. A July shakeup put Michael Murphy, a British manager who fixed problems at the U.S. paper, in charge. Pearson vows to make a profit at FT.com by 2002.

The newspapers' fat profits have made those online investments affordable. But Pearson's formula could fizzle as the economy weakens. For now, Olivier Fleurot, managing director at the FT, sees growth, not softness, for the next six weeks. Pearson is revving up those presses.

By Stanley Reed in London, with Tom Lowry in New York

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The Financial Times Takes On the World

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