[Evolution] reuters article

[Thomas Frayne <tomf sjpc org>]

BOOKS 


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Reversal of Fortune

By PAUL INGRASSIA

In the frothy spring of 2000, when the Internet and stock-market booms
were hitting new highs, so was the stock of Reuters, the venerable
British news agency turned market-data colossus. On March 6, its share
price hit Â16.23 on the London Stock Exchange, almost three times what
it had been 16 months before.

Pity the investors who bought then. During the next 2 1/2 years the
stock lost 90% of its value, Reuters reported its first yearly loss
since becoming a public company, and it started shedding thousands of
employees. It was a stunning fall. Who better to chronicle it than two
former Reuters journalists, right?

Well, wrong. "Breaking News: How the Wheels Came Off at Reuters"
(Capstone, 224 pages, $19.95) is a badly written book that rarely misses
a chance to use an anonymous negative quotation instead of a crisp,
real-life example. Co-authors Brian Mooney and Barry Simpson are broadly
correct that Reuters was brought to its knees by arrogance, complacency
and technologic mega-projects that spun out of control. But beyond these
generalities -- already reported in many newspapers and magazines --
their book smacks of a journalistic laziness that Reuters itself would
have never let them get away with.

Before explaining further, some disclosure is in order. My colleagues
and I at Dow Jones Newswires know Reuters as one of two major
competitors in second-by-second financial news, the other being
Bloomberg. Despite its recent woes, Reuters remains the world's largest
distributor of market-data terminals and thus a distributor of the Dow
Jones wires. What's more, I serve on the board of Factiva, the news
database that is a 50-50 venture between Reuters and Dow Jones, and I
once worked at Dow Jones Telerate, which competed with Reuters until Dow
Jones conceded defeat and sold Telerate in 1998. In short, I know
Reuters as a rival and partner.

The company's origins go back to the mid-19th century. It was founded by
Paul Julius Reuter, a German Jew transplanted to London who had once
used carrier pigeons to bridge a telegraph gap between Belgium and
Germany. His agency spent its first 120 years building more legend than
fortune. It was first to break the news of Abraham Lincoln's
assassination to Europe and scored scoops on the wars that built the
British Empire. Authors Ian Fleming and Frederick Forsythe cut their
teeth at Reuters.

[Book]
The fate of a venerable news agency
in a competitive new world.



But profits were marginal. Then, in 1964, Reuters introduced a simple
desk-top computer terminal to provide U.S. stock-market information to
overseas customers. This success was followed in 1973 with Reuters
Monitor, a terminal that allowed banks to display newly deregulated
foreign-currency rates to a global market.

Monitor was ingenious. Banks paid to "contribute" their rates to the
Reuters screens, then paid again to buy the screens themselves, to which
Reuters added market-moving news. Even its executives were stunned by
Monitor's success. Over the next decade, as Messrs. Mooney and Simpson
tell it, profits soared to Â55 million from just over Â1 million in
1973, "a compound growth of almost 50% a year."

In 1984 Reuters went public, creating a financial windfall for the
British newspapers that owned it and making its executives instantly
wealthy. Two years later it bought Instinet, which allowed anonymous
electronic stock trading and became hugely profitable in the 1990s. The
journalists-turned-executives who had engineered all this retired,
handing the reins to younger journalist-businessmen led by CEO Peter Job
in 1991.

The book presents lots of voices describing the Job decade, boom years
in which Reuters exploited its successes but ultimately didn't prepare
for sea changes in the way market data was sold. But who are these
people? We hear from "one former member of the executive committee" and
several times from "one former senior executive" without knowing whether
it's the same one. Then there is an "ex-marketing director" and "one
American manager" who might or might not be the same as "a former
American executive." Also a "senior technical manager," "one Reuters
insider" and so on. Meanwhile we are told that warring camps within
Reuters are exchanging "vitriolic messages . . . many couched in highly
colorful language." How colorful we'll never know; the authors don't
provide an example.

In "Breaking News," the hallowed journalist's goal of objectivity seems
to be served, if that is the word, by presenting two views on a subject
and letting the reader decide. Two rival executives, Jeremy Penn and
John Parcell, had successive control of Project Armstrong, an attempt to
build a Bloomberg killer, but Mr. Parcell let it wither. The authors
write: "Parcell's former colleagues say this was because he realized he
had inherited a product that was going nowhere. Penn's men say it was
because he wanted to turn in good figures so refused to spend any more
on development." Well, guys, which is it? As for describing the products
themselves, Messrs. Mooney and Simpson too often rely on jargon. The
"Bloomberg platform was closed in an environment that was going
increasingly open," they write. Unless you're a market-data
professional, you won't know what this means or why it's important.

Reuters did go astray. The euro made foreign-exchange trading less
lucrative, and Instinet lost its monopoly on electronic share trading.
Reuters then tried to leapfrog Bloomberg with technology, never fully
grasping that Bloomberg's strength is a unique store of historical
prices and other data.

The jury remains out on Reuters's comeback. But it is clear that,
whatever its sins, the company deserves to have its story told in a
better book than this.

Mr. Ingrassia is president of Dow Jones Newswires.

Updated December 9, 2003

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