Reuters Group PLC

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Reuters Group PLC

85 Fleet Street
London EC4P 4AJ
United Kingdom
Telephone: (44) 20-7250-1122
Fax: (44) 20-7542-4064
Web site: http://www.reuters.com

Public Company
Incorporated: 1865 as Reuter's Telegram Company Limited
Employees: 16,744
Sales: £3.2 billion (2003)
Stock Exchanges: London NASDAQ
Ticker Symbols: RTR; RTRSY
NAIC: 514110 News Syndicates; 514191 On-Line Information Services; 523110 Investment Banking and Securities Dealing

Reuters Group PLC has from its inception employed any and all means at its disposal to achieve timely dissemination of news and information. From the founder's mid-19th-century use of carrier pigeons to scoop the competition to the late 20th-century exploitation of satellites and global computer networks to provide round-the-clock data, the company has remained at the forefront of its industry. With the establishment of an Internet presence in the late 1990s, the company's profile began to evolve, from a behind the scenes news wholesaler to a leading source for late-breaking stories, one with emerging brand-name recognition. As Reuters confronted the many challenges facing news agencies in the years after the attacks of September 11, 2001, it set out to reinvent itself as a web-savvy, diversified information company, with the aim of becoming the preferred source for first-hand news and financial data in the new millennium.

Mid-19th-Century Origins

Reuters is named for its founder, Julius Reuter. A native of Germany, Reuter was born Israel Beer Josaphat in 1816. He converted from Judaism to Christianity and adopted his new name while on a brief trip to London in the 1840s. After working as a publisher in Berlin, he fled the city during the revolution of 1848 and arrived in Paris. Here he is said to have worked for Charles Havas, the French news agency pioneer, before setting up in business himself. In 1849 Reuter started his own newssheet, translating information taken from French newspapers into German and sending this data to provincial papers in his homeland. The business failed after a few months. Reuter left for Germany to establish a service in Aachen, supplying financial and general news from the major centers of Paris, Brussels, and Berlin to the merchants and bankers in Cologne and elsewhere. The enterprising Reuter used carrier pigeons to bridge the gap in the telegraph line then existing between Aachen and Brussels, thereby achieving a seven-hour jump on the local mail train.

By the end of 1850 the gap in the telegraph line was closed and Reuter moved to London. In response to the laying of a cable across the English Channel, linking the stock exchanges of London and Paris, he opened an office near the London Stock Exchange in October 1851. In addition to being the financial center of the Victorian world, London was becoming the communications center for the growing world telegraph network. Free trade and a free press added to the atmosphere Reuter needed to succeed in his new venture. He had long been impressed by the potential of telegraphic communication and the profits to be derived from the sale of news and information via this medium. Twice a day, for a fixed-term payment, his Submarine Telegraph office provided London and Paris brokers and merchants with opening and closing prices in both capitals. He gradually widened his geographic range and in 1857 made a contract with the recently established telegraphic news agency in Russia.

The repeal of the newspaper stamp duty—a tax on the sale of newspapers—in 1855 was to transform the British press, making way for the penny daily papers and the rise of popular journalism. Newspapers had more space for news, and their readership extended rapidly. The London Times already had its own network of correspondents in Europe, the Near East, India, China, and the United States, and refused to make any contract with Reuter. In 1858, despairing of the Times, Reuter approached several other London daily papers and persuaded them to subscribe to his news service. This was a breakthrough. The Times eventually softened its attitude and made a contract for telegrams.

Reuter was by this time offering general and political news, received by telegraph from all over Europe, as well as financial information. Reuter pioneered the information embargo and foreshadowed real-time transmission of information in 1859, when he persuaded Napoleon III to give him an advance copy of a speech. Reuter held the address until the French leader began speaking, then transmitted it to the newspapers via telegraph. The speech heralded the war of Italian liberation.

After several unsuccessful attempts to lay a cable across the Atlantic, a transatlantic line was finally laid in 1866. By this date Reuter was already receiving news from agents in many parts of the world beyond Europe. His correspondent in the United States reported the Civil War and was two hours ahead of rivals in announcing the news of the assassination of President Abraham Lincoln in 1865.

Julius Reuter was a businessman, collecting and selling news, rather than a journalist. The first editor was Sigismund Engländer, a Viennese revolutionary, who had fled to Paris at the same time as Reuter in 1848. Engländer was one of several emigrés employed in the early years of the business. His great knowledge of the politics and culture of Europe opened many doors. When the Russo-Turkish War broke out in 1877, he went to Constantinople as chief correspondent.

Incorporation in 1865

In 1865 Julius Reuter's private business became Reuter's Telegram Company Limited. The new company was incorporated with a nominal capital of £250,000. Reuter was appointed managing director. One reason for the restructuring was to raise capital to pay for a cable from England to Norderney on the north German coast. This cable became the link in the first telegraph to India in 1866. In pursuing his grand design of creating a world news agency, Reuter was ready to become a cable owner as well as a cable user. In 1869 he and Baron Émile d'Erlanger, a Paris banker, financed a French cable across the Atlantic. This company was absorbed by its rival, the Anglo-American Telegraph Company, in 1873. After this, Reuters became less exposed to the charge of seeking to monopolize news supply.

In the 1860s Reuters faced two main news agency rivals, Charles Havas in Paris and Bernard Wolff in Berlin. From this period until the 1930s Reuters, Havas, and Wolff divided most of the news of the world outside North America between themselves. The leading member of the "ring combination" was Reuters. The company's exclusive territories were the most extensive, and its network of offices and agencies, correspondents and stringers made it the largest news contributor to the pool. This activity, and Britain's prominence within the world telegraph system, made the Reuters office—by now in Old Jewry, London—the international clearing center for news. Reuters had established an enviable reputation for speed, accuracy, and impartiality in news collection and distribution.

In 1865 Reuters opened an office in Alexandria, its first office outside Europe. Offices were established in Bombay and other Indian cities from 1866. India became an important territory for Reuters. As the world's communications network spread to India and the East, the company followed the cable to China and Japan in 1871 and on to Australia in 1872. The prestige of Reuters—and also its profitability—came to depend heavily upon the growing British Empire. Reuters was to report the many wars which accompanied imperial expansion. From the 1870s the transmission of private telegrams for both businesses and individuals within the empire became a major Reuters activity. This was especially successful in the East where the substitution of code words for common phrases saved words and thus money. The revenue from this enterprise helped to pay for the news services, which increasingly lost money.

In 1878 Reuter retired as managing director. He had been granted a barony in 1871 by the Duke of Saxe-Coburg-Gotha, a title recognized by Queen Victoria in 1891. His son Herbert succeeded him as managing director. Baron Herbert de Reuter did not possess the same business acumen as his father, but he raised the standard of journalism within Reuters, meeting the public demand for more popular news in the 1890s. He introduced the latest technology to Reuters, but he also led the company down some dangerous paths. Forays into advertising and banking very nearly led to financial ruin. The formation of a Reuters bank was his final mistake. Business worries and the death of his wife contributed toward his suicide in 1915.

Reuters Taken Private in 1916

The Boer War of 1899 to 1902 had been a great drain on the company's resources, but it had been well reported and enhanced the reputation of Reuters for impartiality. It had placed correspondents on the Boer side as well as the British. From this scene of operations came the new head of Reuters. Soon after Herbert's death, Roderick Jones, manager in South Africa, became the first non-family managing director. To escape a hostile takeover bid, the company returned to private ownership in 1916. Jones and Mark Napier, the company's chairman, formed a group to buy the entire shareholding. Reuter's Telegram Company now became Reuters Limited. Napier died in 1919, leaving Roderick Jones as the principal proprietor and executive head, a post which he held until 1941.

Company Perspectives:

We provide indispensable information for professionals in the financial services, media and corporate markets. Our information is trusted and drives decision-making across the globe. Our reputation is based on speed, accuracy and freedom from bias.

World War I was a difficult time for the company. The cost of reporting was high both in terms of profits and of the independence that Reuters strove to achieve in all its business and news transactions. The private telegram business was no longer so profitable, since the censors would not allow the use of codes. Reuters was accused of being in the pay of the British government, and this was a difficult charge to deny. Roderick Jones was also head of the Department of Propaganda at the Ministry of Information, work for which he was knighted.

As head of Reuters between the two world wars, Roderick Jones ran the business as an autocracy. Reuters found it hard to keep its lead over the other international news agencies, especially the Associated Press and the United Press, both U.S. agencies. Jones thought that Reuters could seek to work with the British government, so long as it was not seen to be working for it. Reuters badly needed government subscriptions. Jones was careful not to ask for subsidies.

In 1920 Reuters set up a trade department to expand the distribution of business news. This was followed three years later by a service of price quotations and exchange rates sent in Morse code by long-wave radio to Europe. This became the company's chief commercial service in Europe, later reaching other parts of the world via more powerful radio transmitters. In 1927 Reuters started using teleprinters to distribute news to London newspapers. In 1934 the company began news transmission to Europe by Hellschreiber, a forerunner of the radio teleprinter.

Takeover by Newspaper Cartel in 1925

In 1925 the Press Association (PA) had taken a majority shareholding in Reuters. It followed this in 1930 by purchasing the remainder of the Reuters shares, except for 1,000 retained by Roderick Jones. In 1941 the PA directors forced Jones to resign, believing he had compromised the agency in his dealings with the British government. The government itself helped to ease Jones out. The Reuter Trust was now established to ensure the independence of the agency. From 1941 the company was jointly owned by the PA and the Newspaper Proprietors' Association (NPA). A commonwealth dimension was added when the Australian Associated Press (AAP) and the New Zealand Press Association (NZPA) joined the partnership in 1947. The Press Trust of India joined in 1949, only to leave four years later.

Christopher Chancellor was general manager during the 1940s and 1950s. Under his leadership Reuters did not crumble along with the British Empire, despite the growing ascendancy of the U.S. news agencies. The range of economic services expanded, and Reuters assisted in the establishment of news agencies in postwar Europe, and later in the Third World. In Chancellor's day, the newspaper owners of Reuters were not adventurous. They were aiming at little more than balancing the books. They expected to pay the minimum annual contribution towards the running of Reuters and to get their news cheap.

Computerized Information, Rapid Expansion: Late 20th Century

Walton Cole, who succeeded Chancellor in 1959, had strengthened the news file during the later stages of World War II as managing editor. Cole died in 1963. His successor, Gerald Long, sought to make Reuters an aggressive and profitable international news organization. Notably, he persuaded a reluctant Reuters board to enter the market for computerized information. This initiative was eventually to transform the company's character and to earn it huge profits. Long encouraged Michael Nelson, the manager of Reuters Economic Services, to lead Reuters into price reporting via computer terminals. In partnership with Ultronic Systems Corporation of the United States, Reuters started a desktop market-quotation system called Stockmaster in 1964. It served Reuters clients throughout the world outside North America. In just ten years the profits from Stockmaster and its successor Videomaster amounted to £4 million.

In 1971 the collapse of the Brenon Woods Agreement, which had regulated rates of exchange, encouraged Reuters to undertake another daring yet calculated initiative. This was the introduction of the Reuter Monitor Money Rates service in 1973. Catering to the needs of the decentralized money markets, Monitor was the first of a number of contributed data products designed to serve the international business community. The Reuter Monitor Dealing service followed in 1981. This enabled dealers in foreign currencies to conclude trades over video terminals. These innovations gradually made Reuters more profitable than ever before. In 1963 the company had made a profit of £51,000; in 1973 profits reached more than £709,000; and in 1981 profits were more than £16 million.

Key Dates:

1851:: Julius Reuter opens the Submarine Telegraph Office in London.
1865:: Reuter incorporates Reuter's Telegram Company Limited; first office outside of Europe opens in Alexandria, Egypt.
1916:: Roderick Jones, managing director of the company, and Mark Napier, chairman, form group to buy entire shareholding of Reuters Telegraph, forming a new, private company, Reuters Limited.
1925:: The Press Association acquires majority stake in Reuters.
1941:: The Reuter Trust is formed, a joint company owned by the Press Association and the Newspaper Proprietors' Association.
1947:: The Australian Associated Press and the New Zealand Press Association join the Reuters Trust.
1973:: Reuter Monitor Money Rates service is formed; Reuters creates Information, Dissemination and Retrieval Inc., a U.S.-based subsidiary.
1993:: Reuters New Media Inc. is formed.
1997:: Reuters establishes Global Technical Centre in Geneva.
2003:: Reuters launches the Fast Forward Programme.

On the news front, there were similar technological advances. In 1968 an Automatic Data Exchange (ADX)—a computerized message-switching system for faster handling and distribution of news throughout the world—went into operation in the London editorial offices. This was the first of its kind to be used by an international news organization. In 1973 Reuters formed a U.S. subsidiary, Information, Dissemination and Retrieval Inc. (IDR), to develop and manufacture systems and equipment for the company's use in cable television news and retrieval services. For the first time in 1973 Reuters journalists in New York began to use video display units for writing and sending news.

1984 IPO Presages Rapid Growth

Glen Renfrew, a 32-year veteran of Reuters, became managing director in 1981. Charged with the development of Reuters' computer services since their inception in 1964, Renfrew would be hailed as the architect of the media firm's spectacular growth throughout the 1980s. A key to his strategy was the 1984 flotation of Reuters Limited as a public company, Reuters Holdings PLC. As part of the restructuring, the composition of the board was broadened to make it more international, and the number of directors was increased to include the first representatives from outside the newspaper world. A separate company, Reuters Founders Share Company, was formed to maintain the Reuter Trust principles. Through this company the trustees and their chairman retained a single share with the power to outvote all other shares to prevent a takeover bid. Sir Christopher Hogg, chief executive of Courtaulds plc, became chairman of Reuters in 1985.

The flotation raised about £52 million of new capital which was available for investment in new products and new technology. Reuters Monitor quickly expanded to become the agency's largest operation. The company went into the international news picture business in 1985 when it purchased the United Press International picture service, and launched a news picture terminal in 1987. In 1985 Reuters acquired control of Visnews Ltd., the international television news agency in which it had held a stake since 1959. Revenues more than doubled from less than $1 billion in 1986 to over $2.7 billion by the time Renfrew retired in 1991. Net income nearly quadrupled from $119 million to $430 million during that same period, while earnings per share tripled. In line with this remarkable financial performance, Reuters' stock price shot from $8.25 at issue to nearly $29 at the close of 1991. Worldwide staff numbers more than tripled from less than 3,000 in 1980 to more than 10,000 by 1991.

A 1989 reorganization categorized Reuters' services under five areas—real-time information, transaction products, trading room systems, historical information, and media products. The related products were named with a view to the 21st century—Equities 2000, Money 2000, Dealing 2000, and Triarch 2000. That same year, Reuters' geographical divisions were organized according to three time zones—Reuters Asia; Reuters America; and Reuters Europe, Middle East, and Africa.

The 1990s and Beyond

Former foreign correspondent Peter Job was selected to succeed Renfrew as managing director in March 1991. Though Reuters made a number of significant acquisitions in the early 1990s, Job emphasized the internal development of new products to serve emerging information needs over the purchase of market share in existing segments. Key to this strategy was Reuters New Media Inc., a division created in 1993 to foster fresh markets. Andrew Nibley, executive vice-president of the new operation, told Editor & Publisher 's Jodi Cohen that New Media's chief objective was "to be the number one news application in cyberspace." In doing so, the company placed a strong emphasis on the Reuters brand, transforming it from a behind-the-scenes role to a distinct image as the leader in "the business of information."

Reuters launched the next-generation versions of its core product lines—Markets 3000, Treasury 3000, Securities 3000, and Money 3000—in 1996. The company continued to grow vigorously in the early 1990s, increasing revenues from $2.7 billion in 1991 to $4.2 billion by 1995. Though net income grew more slowly, from $430 million to $642 million, the company boasted a $1.4 billion stockpile by the end of 1996.

However, by the end of the decade it became increasingly clear that the company's 3000 products would not be enough to ensure substantial growth in the information age. For one, persistent operational problems with the new products stalled the full implementation of the new systems, in addition to delaying the company's marketing campaign, leaving sales far below original projections. At the same time, the continued, rapid development of the Internet, where countless new rivals had begun to offer much cheaper financial services to a range of clients, threatened to render the company's business strategy obsolete. Although Reuters did devote resources to repairing the glitches in its 3000 products, it was clear that it would also need to develop an Internet strategy of its own in order to remain competitive. It took its first step in this direction in October 1997, when it earmarked £50 million for the establishment of a "Global Technical Centre." Based in Geneva, the new division would be responsible for creating Internet-related products for Reuters. In the same year, the company launched its first web site.

Reuters suffered a more damaging setback in early 1998, when reports emerged that its U.S. subsidiary, Reuters Analytics Inc., may have hired a consulting firm to steal financial information from one of the company's primary U.S. rivals, Bloomberg L.P. The controversy revolved around Bloomberg's highly touted analytic systems, which enabled financial managers to analyze business transactions, study company histories, and track bond issues. The precision and ease of Bloomberg's system made it difficult for Reuters, who had no similar product, to compete in the U.S. financial market. The company eventually released a statement declaring its innocence, explaining that it had directed the subsidiary to evaluate the Bloomberg product, not steal it; in the end the charges were dropped. However, its slow, somewhat clumsy response to the allegations did a great deal to undermine market confidence, and the company watched its overall stock value plummet more than £1.6 billion in the immediate wake of the scandal.

The Bloomberg controversy also underscored a glaring weakness in the Reuters business model: By not offering detailed analysis to go with its financial information services, the company's products simply could not compete with the more comprehensive offerings of its competitors. At the same time, it was becoming clear that the Internet, while still lagging behind the larger data-providers in terms of speed and reliability, would pose an increasingly larger challenge, as well as opportunity, as technology improved. While Reuters attempted to address this mounting challenge with a series of minor acquisitions at decade's close, it was becoming clear that a more radical reshaping of the company's strategy might be essential to its future growth.

Entering the New Millennium: New Challenges in a Changing World

By the year 2000, Reuters had become firmly enmeshed in the intricate web of strategic alliances and mergers that formed the backbone of the Internet, forging joint ventures with software and financial groups such as Multex and Aether, and acquiring the Yankee Group, an up-and-coming e-business specialist based in the United States. On one hand, this aggressive approach stoked the company's stock valuation, driving shares up to £12.58 by late July 2000, and attracting a host of new high-powered clients, among them Merrill Lynch. However, the flurry of acquisitions also seemed to lack a specific direction, giving the company a host of new products that were not unified according to a single guiding business philosophy. By late 2001, in the wake of the dot-com crash, terrorist attacks in the United States, and significant market fluctuations, it had become apparent that Reuters needed to get itself back onto solid footing.

To address these concerns, in 2001 new CEO Tom Glocer launched a major reorganization project, dubbed the "business transformation program." The restructuring called for approximately 4,000 job cuts over the next three years, and aimed to streamline operations into four discrete business segments. In June 2003 Reuters introduced Fast Forward Programme, an effort to simplify the company's product line. The following month brought signs of improvement. On July 22, Reuters entered into contracts with two leading brokerage firms: Goldman Sachs—a longtime Bloomberg client—and Lehman Brothers. At the same time, results for the first two quarters of the year exceeded original expectations.

The new millennium posed unique challenges to Reuters. As a news wholesaler, Reuters was for most of its history accustomed to working behind the scenes of the major news outlets it served. Now that it had a strong web presence, however, the company had to adapt to its new, public role as a news source. At the same time, the company had the task of providing up-to-the-minute global news in a world deeply divided by conflict. Since Reuters delivered the same information to all its markets, whether in the United States or the Middle East, its traditional standard of objectivity would become more crucial than ever.

Principal Subsidiaries

Dow Jones Reuters Business Interactive LLC (U.S.A.); Instinet Group Incorporated (U.S.A.; 63%); TIBCO Software Inc. (U.S.A.; 49%); The Yankee Group (U.S.A.)