5 Min Read
(Reuters) Thomson Reuters Corp named Jim Smith chief operating officer, putting him in a strong position to succeed Chief Executive Tom Glocer, who is under pressure to boost sales to financial institutions.
The company also said it was merging its Markets division with its Professional division, which was run by Smith, in the second major restructuring in two months.
In July, Markets division head Devin Wenig departed along with five other executives.
The Markets unit, which serves financial institutions and accounts for about 60 percent of total revenue, is struggling because of the slow uptake of a key new desktop product, Eikon, and as banks and other institutions around the world cut budgets and lay off tens of thousands.
The company's controlling shareholder, Canada's Thomson family, has been concerned about the performance of the unit, people familiar with the thinking of the board said in July. Glocer has been given about a year to accomplish a turnaround, they said at the time.
The appointment of Smith raised fresh questions about how long Glocer will remain CEO, and whether the Markets business had deteriorated further in the last two months.
Thomson Reuters shares, which have lost more than 20 percent this year, closed 2 percent lower in New York trade.
"I think Jim is an extraordinary executive and he's always been in the frame of who the board should consider one day as a successor," Glocer said in an interview, in response to a question about CEO succession plans.
"That is a board process. It hasn't started yet. I'm going to stay for a good long time to fix and thrive under this business," Glocer said.
The news and information company has undergone a series of shakeups this year as Markets revenue growth slowed and Eikon sales disappointed. The division competes against Bloomberg LP, News Corp's Dow Jones and FactSet Research.
Suzanne Stein, an analyst at Morgan Stanley, wrote in a note to investors that Wednesday's announcement showed that Thomson Reuters "remains in a period of turmoil."
Thomson Reuters "will need to show improved results in Markets, and continued strength in Professional in order to give investors confidence it has solved its internal issues," she wrote.
Smith, 52, was chief executive of the Professional unit, which sells legal, tax and accounting products. Its Westlaw legal database has been gaining market share in the United States against Reed Elsevier's LexisNexis.
That division, which accounts for about 40 percent of total revenue, generated revenue growth of 8 percent in the second quarter, compared with just 1 percent in the Markets division.
"I think it says that Jim is being groomed as a future CEO of the Thomson Reuters organization," said an analyst with a major investment bank who covers the company.
A former journalist, Smith joined the Thomson newspaper group in 1987, eventually becoming chief operating officer of Thomson Corp, which acquired Reuters Holdings Plc in 2008.
He is known as a good communicator and forthright executive who gives his team autonomy along with accountability.
His appointment gives a Thomson Corp veteran oversight over Markets for the first time. Glocer and Wenig, who was once considered a potential candidate to take the top job at the company, both came from Reuters.
Glocer, 51, took direct responsibility for the turnaround of the Markets business in July.
He said on Wednesday he would remain involved with customers, strategy and products including Eikon, while Smith would take the "operating rhythms" and "directly manage in-year performance."
Glocer said the merger of Markets and Professional may result in some layoffs, though any cutbacks would affect "chiefs, not Indians in front of customers."
Claudio Aspesi, an analyst at Sanford Bernstein in London, questioned why the company did not implement the changes in the summer when it reorganized the Markets division.
"It could have been implemented then," he said. "Has anything changed in the view of senior management and the board?"
Glocer said both the Markets and Professional divisions had undergone restructurings this year, and Wednesday's move was aimed at putting a new organization in place for next year.
He said Eikon sales and migrations from existing products were "good" in September and a major software upgrade was due in October.
"We are really focused on the remainder of the year on performance and product quality with a view we will enter the year with a significantly improved and stable product," he said.
Thomson Reuters also announced that Chief Financial Officer Bob Daleo planned to retire next July after he turns 63. He will be replaced in January by Stephane Bello, who is now CFO of the Professional division.
The company said it would maintain the current financial reporting structure for the rest of the year as it transitions to a set of focused business units.
Thomson Reuters shares slipped 2 percent to $27.77 in New York and 0.48 percent to C$28.74 in Toronto.
Reporting by Jennifer Saba, editing by Tiffany Wu and Ted Kerr