NEW YORK (Reuters) - Five more senior executives are leaving Thomson Reuters Corp in a shake-up of its Markets division, which has posted disappointing revenue growth amid slow sales of a key new product.
The departures follow that of Markets chief Devin Wenig, announced on Thursday and reflect the concerns of the board and the controlling shareholder, Canada’s Thomson family, about the performance of the division. The unit, which serves banks, brokerages and other firms, contributes almost 60 percent of the company’s revenue.
In particular, the slow and difficult roll-out of Eikon, a flagship new product for financial professionals, has been a disappointment.
Analysts are concerned that Thomson Reuters might not meet its revenue goals over the next few years if it cannot convince existing clients to migrate to the new platform, and win new customers away from Bloomberg LP and others.
“The real issue with Eikon was whether it could move market share or not,” said Claudio Aspesi, an analyst with Sanford Bernstein. Wenig’s exit highlighted these worries, he said.
“There’s a concern about how the Markets division will perform for the year and increased uncertainty of management turmoil,” Aspesi said.
Thomson Reuters’ stock fell 3.11 percent in New York on Friday.
One big project under Wenig was the launch last September of Eikon, aimed at knitting together dozens of disparate products after Thomson Corp’s acquisition of Reuters in 2008.
The new product incorporates social media-like functions such as Twitter, and was designed to be more cost-effective and easier to install and provide upgrades.
But nine months into the roll-out, the company has migrated to Eikon only about 24,500 of the roughly 500,000 users of its legacy products, and Eikon brought in only about 3,500 new users, according to an internal company memo this week.
Thomson Reuters CEO Tom Glocer announced a restructuring of the Markets division and said he would assume personal responsibility for the business instead of hiring a replacement for Wenig. The moves put the onus of a turnaround squarely on Glocer.
“As he becomes more directly involved ... it’s going to be very difficult to blame any poor performance on anyone else,” said Larry Tabb, founder and CEO of Tabb Group, a financial markets research firm.
At a time when many banks are cutting staff, he noted, it was a tough task to persuade them to buy new products.
“During a time of transition, people vote for status quo rather than change,” he said. “Thomson Reuters is dealing with very powerful competitor. Bloomberg, fortunately for Bloomberg and unfortunately for Thomson Reuters, has not made mistakes.”
Wenig was one of Glocer’s closest associates, the first person he hired into Thomson Reuters 17 years ago. Both are former mergers and acquisitions lawyers, and Wenig was considered to be a contender for the top job at Reuters before the company was taken over by Thomson in 2008.
“The board ... has wanted to make more substantial changes than I wanted or would have accepted,” Wenig wrote in an email to his direct reports.
The other senior executives leaving Markets are Reuters Media President Chris Ahearn, Global Sales and Customer Service Managing Director Joerg Floeck, Investment & Advisory President Eric Frank, Chief Marketing Officer Lee Ann Daly and Global Head of Human Resources John Reid-Dodick.
“This transformation is about driving growth, unleashing cross-company capabilities and making it easier to get things done,” Glocer said in a memo to employees.
“Importantly, it’s also about accountability and transparency. As we work to create a performance-driven culture, let’s make it a culture where results speak the loudest and collaboration is the norm.”
Glocer said he was not planning other major management changes.
Thomson Reuters’ Markets division is recovering slowly from the financial crisis, which battered the profits of many of its customers. The company’s Professional division, which serves legal, tax and accounting professionals, has performed more strongly.
Revenue in the Markets division rose 2 percent in the first quarter of this year. Revenue at the Professional division rose 8 percent. Both divisions derive most of their revenue from long-term subscriptions, which means there is a lag before the company gets revenue from a product sale.
Thomson Reuters, which is scheduled to report second-quarter earnings on July 28, reaffirmed its 2011 outlook on Thursday.
Thomson Reuters stock closed at $35.51 in New York on Friday, virtually the same as when the merger closed in April 2008. Shares of competitor FactSet Research have soared 71 percent over the same period.
Aspesi said he was pleased that Glocer would run the Markets division directly because he knows it well.
“At the same time, clearly not all is well,” he said.
Reporting by Jennifer Saba, editing by Ted Kerr and Tiffany Wu