Reuters Soars on Plans to Expand Web Presence
Updated from 8:09 a.m. EST
Shares of
Reuters Group PLC
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soared Tuesday after unveiling an $800 million plan to increase its Web presence, a 9% rise in profits and a board shake-up.
Investors embraced the bevy of announcements: Reuters shares jumped 26%, or 25 3/4, to 125 3/4 in late afternoon trading. (Shares closed up 25, or 25.3%, at 125 1/2.)
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The London-based news and information giant said it will sell a portion of its Web incubator
Greenhouse Fund
to the public and that it is considering an initial public offering of its online brokerage service
Instinet
.
Reuters also unveiled a joint venture with online financial data provider
Multex.com
(MLTX)
. The two companies will form a European operation modeled on Multex's U.S. Web site. Each company will own 50% of the venture. Multex shares were up 1 13/16, or 6%, to 31 5/8.
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The company has been criticized for its apparent lack of an overall Internet strategy. Tuesday's announcements appear to be its answer to those criticisms.
The company reported pre-tax earnings of 632 million pounds (or $1.01 billion), a 9% rise over year-ago figures. Earnings per share rose 13% to 30.2 pence (48.27 cents per share). Those results were broadly in line with analysts' expectations.
Reuters also said it is forming another new company with U.S. wireless company
Aether Systems
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. That company will develop wireless services for European clients, Reuters said.
Reuters also said two long-time senior execuitves, Andre Villenueve and David Ure, will leave the board, while Philip Green, who joined the company last year to run its trading unit, now joins the board. Villenueve is resigning to concentrate on his role as executive chairman of Instinet, Reuters said.
The company also warned investors that a planned $479 million reorganization charge -- half to be taken this year -- would cut into 2000 profits, particularly in its core financial information business.
Merrill Lynch
upgraded Reuters to buy from accumulate on the news.
The move to shift its focus from a largely business audience to the wider individual investor audience should allow the company to pursue new growth opportunities, Merrill said. "Reuters is redefining its audience from professional (1.1 million people) to 65 million high-end individual investors," Merrill said in a research note Tuesday.
Until now, Reuters had ceded the Internet to competitors such as
Bloomberg LP
and
Thomson Financial
, a unit of Toronto-based
Thomson
, which are both farther along in establishing Web beachheads, said Rob Sterling, analyst with Web research firm
Jupiter Communications
.
"On one hand, they have firmly established themselves as data providers to other sites,"
Yahoo!
(YHOO)
and
Lycos
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among them, Sterling said. "On the other hand, they haven't distinguished themselves as a destination site, which is obviously a key for a content site."
