Please ensure Javascript is enabled for purposes of website accessibility

Pearson PLC (ADR) Stock Surges 16% on Restructuring: Here's What You Need To Know

By Jason Hall - Jan 21, 2016 at 3:20PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Book publisher Pearson PLC is cutting jobs and restructuring its business as demand for printed media and college enrollment in markets it serves continues to decline.

What: Shares of publishing giant Pearson PLC (ADR) (PSO 2.18%) are up nearly 17% just before market close on January 21, following a pre-market announcement that the company was taking steps to reorganize and cut costs. This will include cutting 4,000 jobs, about 10% of its global workforce, as well as other steps to bring its overhead and expenses lower. 

So what: Pearson is undergoing its second restructuring since 2012 with this latest announcement, and combined, it will have cut nearly 10,000 jobs between the two restructuring, largely related to its back office and print operations. In short, part of the cuts are elimination of what management is finding as redundant personnel, but primarily due to shrinking demand for printed media such as textbooks. 

The company is facing slowing college enrollment in its major markets, as well as a technological shift toward more digital fulfillment as key drivers behind its challenges. CEO John Fallon said the following in the company's press release:

Faced with these challenges, we are today announcing decisive plans to further integrate the business and reduce the cost base, rationalise our product development and focus on fewer, bigger opportunities.

Pearson is establishing itself as a leader in digital media, but it's facing stiff competition, and this business typically demands lower revenues in general, so it's unclear if the company will get all of the benefits expected from this latest reshuffle. 

Now what: Pearson is going to have to reinvent itself to survive and thrive, and this is another step in that direction. And it wouldn't be the first time the company changed its spots -- after all, it originally started out 130 years ago as a building contractor. 

With that said, there are a lot of cyclical challenges with its higher education market, as well as the technological shift that's slowly killing the print business, that Pearson must navigate. Together, that's an unenviable position for any business to be in. 

Jason Hall has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pearson plc Stock Quote
Pearson plc
PSO
$10.80 (2.18%) $0.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
379%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.