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Sun 3 Apr 2011 02:24 PM

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Down to the wires

Thomson Reuters CEO Tom Glocer on building the media giant back up after the recession, and his plans for the Middle East market

Down to the wires
Down to the wires
Thomson Reuters spent less than 1/40th of its enterprise value of $40bn on buying up other businesses

When Tom Glocer enters the Arabian Business offices, accompanied by a small coterie of staff, he stops briefly by a photo montage of some of the biggest names of the internet age, and becomes genuinely enthused. The top man at information leviathan Thomson Reuters reels off the names of Microsoft CEO Steve Ballmer, Apple co-founder Steve Jobs and Facebook founder Mark Zuckerberg with boyish alacrity. While the man on the street would associate Thomson Reuters with its most obvious asset — hard-hitting news — it’s immediately clear that Glocer’s heart is wedded to technology. When discussing his favourite websites, names like TechCrunch and EnGadget crop up beside more familiar titles such as the Wall Street Journal and the Financial Times.

But then, of course, technology is absolutely vital to what Thomson Reuters does. Last year, the firm launched its Reuters Insider multimedia platform — which Glocer describes as “a mash-up of YouTube meets a very high-end professional-grade CNBC” which is also linked to a new desktop product, Eikon. It’s all part of the company’s plan to wean professionals — its core market — back away from free sources of information by presenting them with intuitive methods of accessing data faster than ever before.

All this is a far cry from the financial crisis, however. Glocer admits that the collapse of some of Wall Street’s finest left Thomson Reuters in something of a quandary.

“Some of our clients just disappeared — Bear Stearns was a large client, Lehman Brothers was an even larger client,” he recalls. “On the weekend when Lehman went down, at first we were looking at an instant loss of tens of millions of dollars of revenue, which was our annual business with them. One has to be prepared as a business that it could all disappear.”

Fortunately, that business did not vanish into thin air, with Barclays taking on Lehman’s US business, and Nomura acquiring its European and Asian assets. Likewise, Bear Stearns was taken over by JP Morgan. More worrying for Glocer was the fact that financial firms — a core part of Thomson Reuters subscriber base — were cutting costs dramatically, requiring the firm to make changes to its offerings.

“Many of them [the finance houses] had if not an actual death then a near-death experience,” Glocer says. “For instance, that’s one of the reasons why our governance, risk and compliance service [launched last year] is so interesting. Go to any bank, anywhere in the world, and ask them where they are hiring the most people — the answer won’t be on the equities desk, or the FX desk, it will be in their compliance department. We try to help our clients and go to the parts that are hotter.”

Tighter governance is certainly an issue that is being targeted in this region, given the debt problems associated with certain family businesses. The UAE’s Hawkamah is one regional example of an agency that is pushing for a stronger regulatory regime to combat risky behaviour between corporate players.

“We can’t have a situation like Ireland where banks were eight times the GDP of the country,” says Glocer. “The world over, including in this region, regulators not only feel more emboldened to act, and governments are actually saying that they want a safer financial services market. That is feeding a demand for regulatory information and software to try and deal with the huge burden of compliance.”

Now, however, matters are looking far rosier. Thomson Reuters posted full year revenues of $13bn last year, up by one percent, although a final-quarter revenue hike of four percent shows that a full recovery appears to be gaining pace.

For 2011, Glocer says that the firm will target mid single-digit growth, a far cry from the worrying days of 2008.

“If you’ve told me when the world was falling apart on Lehman weekend, the net result would be that we would be flat for two years and then start growing again, but that we would have the safety to continue to invest during this period and come out the other side, I would have been very happy to take that,” he smiles.

In the Middle East, the CEO says that the firm has a fairly simple target, which is to grow the overall business by double digits annually. While that target was being hit pre-recession, growth has slowed, although Glocer says that Dubai, Abu Dhabi and Qatar are beginning to see some more positive signs.

“What I always tell people inside our company is that growth is hard to come by,” he says. “The world isn’t growing that fast in established markets. And growth is the lifeblood of every company. But there are parts of the world that are growing quite fast. Brazil, China and India are the obvious ones, but the Gulf has been a very good area of growth for us over the last ten years.

“It’s much easier to put your sail in a wind that’s strong rather than to sit in a market that’s totally flat and constantly do all the effort and blow into your own sail.”

But Glocer admits that regional unrest will also have its effects. Like the employees of many multinational firms, Thomson Reuters’ employees in Bahrain were forced to work from home during protests that took place in the island state.

“Events in Bahrain will probably put a bit of a dampener on things,” he adds. “I don’t know of any bank that’s expanding activity there, but in general we’re well positioned here, and as the region professionalises, the demand for our products comes with that.”

The main question — according to Glocer — is whether the Middle East will be able to attract more lawyers, scientists, wealth managers and traders over the course of the next ten years. If yes, then Thomson Reuters’ business will grow in lock-step.

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“We’re more related to the level of professionalisation than — let’s say — to general GDP, because we’re not that closely tied to industry,” he says. “The core of what we do is the content and tools that professionals need to do their jobs, so wherever there are professions, that’s where we are investing.”

The professions that Thomson Reuters is currently targeting are financial, healthcare, science, media, legal and tax and accounting, products for which were launched as part of the firm’s answer to the recession.

Where some companies panicked and cut costs to match falling revenues, Thomson Reuters was keen to completely revamp its product offering. There is also more to come, as well, although he is understandably coy on the details.

One particular area of interest for Middle Eastern bankers has been the world of Islamic finance, for which Glocer hints at an expanded offering. The firm already has a collection of legal content related to sharia-compliant financing, which is linked to a markets database on sukuk, similarly structured bonds and the regulations and community that surround them.

“That’s not only something that sells very well here, but also in Malaysia and Indonesia there are very strong markets for that,” Glocer adds. “I think that’s a market that we’ll see mature, standardise a bit more than it is today, and Dubai is very much a hub for that.”

Also on the cards for this year are a new set of acquisitions. Last year, Thomson Reuters spent about $850m on buyouts including Brazilian legal publishing house Revista Dos Tribunais, and UK firm Complinet, as well as an interesting move into the carbon-trading market with the acquisition of Norwegian analytical outfit Point Carbon.

“We acquire lots of small companies, and completed about 30 acquisitions last year,” Glocer says. “We tend to buy small things and build around them rather than going out and buying blockbuster companies. We find it’s harder to create shareholder value that way.”

The CEO says the level of acquisitions this year will be roughly similar to 2010 “plus or minus a couple of hundred million”, given that Thomson Reuters spent less than one fortieth of its enterprise value of $40bn on buying up other businesses.

“There are always gaps because the world changes and the really cool thing is that entrepreneurs are always starting businesses and innovating on a small scale,”Glocer points out. “We don’t believe we have a monopoly on good ideas, and we’ve gotten pretty good at buying companies to get people, to get technology. We seldom buy to acquire customers — it tends to be because somebody has come up with a new and more interesting way of doing something.”

Will any of those acquisitions be in the Middle East? Glocer admits that he would like to see more deal flow in the region, and says that value expectations of firms are more realistic in the Gulf and elsewhere, simply because the recession has taught people that prices can trend downwards as well as up. Thomson Reuters did invest in the region last year, via the purchase of a legal database product co-built by Affinitext and DLA Piper. Elsewhere, local partnerships — which have proved popular for US media giants Yahoo! and Dow Jones — may also be on the cards.

Glocer is also quick to pour cold water on another potential area for expansion, television, at least in the traditional markets. Thomson Reuters has long been an exponent of IPTV — which has a vital role to play in its Reuters Insider offering — but has thus far been reluctant to edge into the highly competitive cable broadcast sector. However, Glocer refuses to rule out a possible linear or cable launch somewhere in the emerging markets.

“We had an interesting venture in India, and if we did linear it would probably be in an emerging market,” he recalls. “We actually don’t think Europe or the US needs yet another 24 hour business news show — the ones that are there are fine. [With regards to the Gulf as a potential market] with the right partner, we’d certainly look at that.”

But he also says that the firm’s primary goal is not to be a mass-market free-to-air news service, especially in a world where the advertising model has been disrupted.

Therein lies a tale; if the content is worth having, it’s worth opening your wallet for. Hundreds of thousands of Thomson Reuters’s clients around the world are clearly agreeing with that model.

“One of the reasons I think we’ve been able to be financially successful is that if you look at who’s hiring journalists and making money, it really comes down to Thomson Reuters and Bloomberg,” Glocer adds. “The reason — I think — is pretty straightforward. We’re serving professionals with the content needed to do their jobs so they’ll pay for it.”

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Glocer on...Reuters Insider

“We decided that in coming out of the recession there were two ways to go. One was to do the obvious thing — which most companies did — was to cut, cut, cut and try and get costs down to match falling revenues. What we actually did was go the other way and increase investment in a series of programmes and last year we released about five big flagship offerings, so a pretty complete renewal of the product line across the company. It has a very innovative video service we call Reuters Insider, which I sometimes refer to as a mash-up of YouTube meets a very high-end professional grade-CNBC and is oriented towards sharing the content and a more modern workload for people who grew up using computers.”

Glocer on... Eikon

“The biggest theme and motivation for Eikon is the quality of experience that professionals now have in our daily life as consumers. If you grow up using Skype, Twitter, Facebook and Google, you are going to have strong expectations in terms of ease of use. I don’t want an instruction manual, I don’t want hours of training — it’s got to be intuitive. I want it fast and clean, and mobile as well as at my desktop. Ironically, if you look at the last generation of professional desktops — and I’d include in that the Reuters offerings as well as Bloomberg – to me they look old-fashioned. They’re not thin client, they are not modern, they are not portable enough, even if work has been done to make a little bit easier. And so the hallmark of Eikon is that it’s a very fast download, and you can get yourself up and running in a matter of minutes. Some of the functions and content are very sophisticated, but it’s intuitive and also has social networking built in.”

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