Reuters in Crisis

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Authors: Ravi Madapati,
Faculty Member
ICMR (IBS Center for Management Research).

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Glocer's Challenge

Glocer, the first American and the first non-journalist to head Reuters, inherited in December 2000, what many believe to be a complacent organization where decisions were made very slow and had to go through many chains of command. In the first nine months of 2002, the company's revenues fell by 7% to $1.4 bn⁴.

Glocer embarked on a major restructuring initiative. He pulled Reuters out of peripheral consulting businesses. He shed 56 non-core investments. He worked on cost savings by unifying the different computer systems used by Reuters. Glocer believed these measures could lead to savings of about $600 mn. He also planned to cut costs by $100 mn at Instinet, the electronic share-trading business in which Reuters held a 62% stake. Reuters had been slow to move its services to the Internet. It was only in February 2000 that Reuters unveiled an $800 mn plan to transfer most of its basic information services on to the Internet. The strategy was to offer additional software packages for analyzing financial data that banks and other blue-chip clients would willingly pay for.

But Reuters timing seemed to be wrong. It had made this sales pitch just when all these companies had started slashing their IT budgets. Recurring revenues made up 90% of Reuters' core sales and came largely from financial institutions, which paid monthly subscriptions to receive Reuters' news and data. Banks and brokerages were canceling subscriptions as they slashed costs to cope with the biggest slump in stock markets for a generation. Investment banks alone, which contributed almost a third of core revenues, had eliminated about 100,000 jobs during 2001 and 2002. The number of Reuters' information screens in the marketplace fell by about 17% at the end of December 2002.

Reuters unveiled 3,000 job cuts, as part of a three-year plan called "Fast Forward" to get the business into shape. The company had already laid off around 3,200 staff across the group during 2001 and 2002. The Fast Forward plan consisted of four key initiatives.

1. To make Reuters' information absolutely indispensable to customers by building up content, analytics, trading messaging capabilities (what Reuters called community) and open technology platform.
2. To take advantage of global scale by moving to a single, scalable data distribution architecture, which was based primarily on the technology, Reuters acquired with Bridge in 2001.
3. To use Reuters' next generation product and existing product obsolescence plan to develop a rigorously segmented product line.
4. To sharpen the focus on key risk management, content management and treasury solutions.

Reuters' main goal in Fast Forward is to emerge as a player respected for financial data as it is for the news. Reuters also wanted to build on its strong platform of analytics and graphics to allow customers to use data for analysis and modeling. Around 87,000 clients already used Reuters Power Plus Pro to run their model on its data.

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4] Fortune March 2, 2003, Deadline for Reuters.