What: Shares of publishing giant Pearson PLC (ADR) (NYSE:PSO) 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.