Media Giant or Media Muddle?

Challenges abound as the newly formed Thomson Reuters tries to outflank Bloomberg

by Stanley Reed

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Thomson's Beattie saw Reuters as a good fit, and Glocer as the right leader Nigel Dickson

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CEO Glocer believes "information majors" will rule the 21st century Brad Harris

The giants of the digital age tend to be companies whose histories are counted in months and years, not decades or centuries. Yet Thomas H. Glocer aims to reinvent the future with Reuters Group, the 157-year-old news agency and financial data giant, and Thomson, a 78-year-old business information empire that started as a newspaper publisher. On Apr. 17, Glocer sold Reuters to Thomson for $15.6 billion, and took over as chief of Thomson Reuters (TRI).

His vision is simple: Turn the two graybeards into something neither could become alone. The new company is more than double the size of archrival Bloomberg, and offers a much wider array of data that stock traders, lawyers, and corporations use every day—and for which they're willing to pay top dollar. The $500 million in annual costs Glocer expects to cut by 2011 is just gravy. "I think this fulfills the potential, if we can execute it, of what Reuters always could have been," Glocer says in an interview at the company's headquarters, overlooking New York's Times Square. Reuters "just wasn't going to get there on its own."

A 21st Century Giant?

If the corporate world of the 20th century was noteworthy for the rise of industrial giants, Glocer insists, the 21st century will be dominated by "information majors." He contends that Thomson Reu­ters, with a market capitalization of about $28 billion and annual revenues of $13.4 billion, is uniquely positioned to join that club. Glocer expects to slash costs by combining Reuters' and Thomson's financial data businesses, computer systems, and executive offices. Later, he wants to supercharge revenues by marrying Thomson's U.S.-centric operations with Reuters' global savoir faire.

Reuters was founded in 1851 when Paul Julius Reuter started sending London stock prices to brokers in Paris via a new undersea telegraph cable. The company has long since branched out into all kinds of financial information and also operates a top trading platform for currency traders. Thomson, meanwhile, started with a single newspaper in Ontario in 1930, then grew into an international chain. But in the 1990s the Thomson family feared the declining profitability of newspapers and sold most of them, shifting instead to business information delivered electronically. Together, Glocer says, the two will become a 21st century media giant, able to deliver to your desktop or BlackBerry everything from a potential merger partner's litigation history to borrowing costs in Dubai to software for managing the company health plan—with no paper involved.

Sounds great, but skeptics abound. Traders have knocked 22% off the company's stock price since its Oct. 31 peak. It's easy to see why. With credit markets in deep freeze and banks firing thousands, a company that gets 60% of its revenues from the financial industry is likely to take a beating. And even if the financial information businesses of the two make a good fit, there's not a lot of other obvious similarity between Reuters and Thomson, with the latter's specialist databases of court cases, tax filings, research findings, and more for lawyers, accountants, doctors, and other professionals.

And in the narrow turf of information for banks and brokerages, Bloomberg is still a formidable foe. True, the rivals now each have about one-third of the financial data market and vast armies of journalists covering business. And Thomson Reuters has a broader portfolio of offerings, more capital, and may be better positioned to weather turbulent times thanks to its strength in emerging markets and foreign exchange, a booming business despite the downturn.

Bloomberg, though, has more cachet—every trader wants one of its terminals—and a sterling reputation for service. And customers say Thomson's financial offerings are a hodgepodge of acquisitions that don't always work together. "It is just a headache that Reuters has inherited," says the head of technology at a major bank in London. Last year, Bloomberg grew about twice as fast as Reuters and Thomson, says David Anderson, editor of Inside Market Data Reference, a market research publication. "Bloomberg has done better than Reuters and Thomson," he says. But Devin Wenig, a close collaborator of Glocer's who will run Reuters, shrugs off Bloomberg as yesterday's story. His real worries: Google (GOOG) or "some kid in Silicon Valley."