Reuters is reborn on its 150th birthday

The information giant had become old news, but chief executive Tom Glocer says it is ready to reclaim its market
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The Independent Online

This month, Reuters celebrates its 150th birthday. In October 1851 a German émigré, Paul Julius Reuter, opened an office in the City of London to transmit stock market quotes to Paris using the new Calais-Dover cable.

So it's an appropriate time for Tom Glocer, the first non-journalist to run the venerable news and financial information giant, to launch a root and branch shake-up of an organisation that even its own executives say has become "arrogant" and "bureaucratic".

The former merger and acquisitions lawyer has dismantled the old Reuters geographic fiefdoms which created so much duplication and infighting in years gone by. These have been replaced by customer segments – four of them: investment banking and brokerage; treasury; asset management; and corporates and media.

"We have to become more customer focused," Glocer told City analysts in a presentation last week. Does this mean Reuters has not responded to the needs of its customers? "Yes," Glocer later told The Independent on Sunday. "We could be quite arrogant and high handed. We would say to people, 'Of course you need our services'."

Glocer believes that everyone at Reuters – not merely the sales people but the engineers, the journalists, even the post room staff – should know it is a commercial company selling its services. "We'd become a bureaucracy," says one senior executive. "We were like the Foreign Office or the BBC when we should've been like Microsoft."

The change is bringing about 1,600 job losses – 1,100 were announced earlier this year and another 500 last week. This is about a tenth of the company's workforce. Staff cuts are nothing new at Reuters: Glocer's predecessor, Peter Job, launched a number of purges in the early and mid-1990s. But like a blancmange, Reuters slurped back into shape and in the end it employed more people than ever.

Glocer aims to increase Reuters' operating margins from the current 10 per cent to 17 per cent – a target he says is a long way away, but the City argues is not as demanding as it might have been. The Reuters boss says that in the "manufacturing" side of Reuters, the objective "absolutely is to be more efficient and effective".

This does not just mean cutting jobs, but also pooling resources. For example, until recently every geographical region had a "big story contingency" team, none of which was big enough to deal with the current offensive against Afghanistan, for example. Now there is only one team – and it is big enough for the present war.

The cuts are intended to save more than £220m a year by 2003, with the backroom functions being cut much more aggressively than the "customer channels". Already there are moans that Reuters could be damaging its unique selling point – the quality and impartiality of its journalism and information collection. "The fact is that Glocer's not a journalist," says one bureau chief. "For all his faults, Job could do any job in the place – if you excuse the pun." Glocer denies there is any threat to editorial, which he sees as sacrosanct.

He intends for his changes to stick – largely because of the people he has hired rather than the people he has fired. The top tier of Reuters is now almost unrecognisable from the collection of career Reuters executives, most of whom had started out as journalist trainees, who ran the company under Job and his predecessors, Glen Renfrew and Gerald Long. Glocer's chief operating officer – the first in Reuters' history – is Philip Green, the former Coloroll director, who arrived just two years ago. The finance director is David Grigson, who was at Emap until last year. The four new section heads include Jane Platt, headhunted from Barclays Stockbrokers, and Devin Weinig, another former lawyer, who is just 35.

The divisional heads are being given autonomy and cash to develop the business areas. Already Reuters has bought its struggling rival Bridge News to add to its editorial offer, and Glocer's decision to cut the dividend – the first cut in Reuters' 17 years as a public company – is intended to "keep our powder dry for when good opportunities present themselves".

Given his M&A background, does this mean he is ready to start shopping among the "value tarnished" businesses in the technology and media sectors? "I'm a big believer in keeping my powder dry," he says. Clearly, as he used the phrase twice – first to indicate Reuters' ability to buy businesses and later to show its caution before striking any deals.

Glocer's reforms are for many people – not least the analysts who almost gnaw their desks in frustration at Reuters' historic inability to exploit its strategic dominance in the financial information market – well overdue. One close follower of Reuters hits the nail on the head: "This company spent 100 years becoming dominant in the collection of information, and another 30 or so becoming dominant in the dissemination of information. Then, probably after becoming a public company in 1984, it sat back and invited all comers to try and steal its markets."

One such upstart was Mike Bloomberg, the ex-Salomon Brothers trader, who saw a niche Reuters was not exploiting in the bonds and derivatives market and built a billion- dollar business out of it. Reuters became so frustrated with Bloomberg that it took to corporate espionage – only to be caught having stolen some of its rival's software.

However, with the company's founder spending his time trying to become Mayor of New York – a rather forlorn hope, given Rudy Guiliani's performance over the past few weeks – Glocer believes Bloomberg is becoming complacent and Reuters might win back some of its lost ground. "You could argue that Bloomberg has been falling to temptations [of grandeur]," he says.

You would get no delusions of grandeur looking at Reuters' share price. At 618p it has more than halved in the past year and is nearly £10 below its peak of 18 months ago.

Glocer is conscious that in the past the company has not been as good at communicating with the markets as it has at communicating market information.

"We're trying to be a bit more transparent," he says.

However, the market's main sanction for a poorly performing company – making it a takeover target – is not available at Reuters. Its articles of association mean no one can own over 15 per cent of its shares, and a foundation of great and good ex-politicians and businessmen control a "Founder's Share" that can be used to block any acquisition.

"The Founder's Share Company was put in place at the time of the original float and I see no reason why its continuance is inconsistent with being 'forward looking'," says Glocer.

There are limits to reform.