After years of going backwards, Reuters
Reuters' full-year results aren't great, but things are definitely improving. While sales were down 5% on the year, the company expects them to fall by just 1.5% next quarter. At the same time, operating profits jumped by 52% to $375 million, largely thanks to drastic cost-cutting and offshoring jobs, a few sell-offs, and a long-awaited return to profit at Reuters' majority-owned electronic trading unit Instinet
Perhaps Reuters' executives can start thinking about growing the business rather than just cost-cutting and fighting to survive.
Growth will likely mean winning back share in the $6.5 billion market for financial-services data. A big chunk of Reuters' revenues come from financial clients, especially in Europe. But Reuters is up against fearsome competitors -- privately held Bloomberg and Thomson Financial, a division of Thomson Corp.
I reckon that, over time, growth will surely come from Reuters' big strengths: a world-famous brand and a reputation for objective journalism from around the world. One way is to launch into consumer television, especially in developing countries such as India and China, where Reuters is establishing operations and where growth potential is huge. There is also room to grow by delivering news via broadband mobile systems. Reuters is exploring this opportunity with the big boys, Vodafone
Looking at shares, they have already had an impressive run-up since August -- that's because the market expects a sizable share repurchase after the sale of Instinet. With the shares now selling for about 20 times 2005 earnings, it's hard to see further upside in the short term -- over the next few quarters Reuters will be focused on the nasty job of finishing-up its cost-cutting and putting an end to sales shrinkage. But after that, Reuters could hold promise.
Fool contributor Ben McClure doesn't own shares of any companies mentioned in this article.