A misjudged investment in the form of Instinet, zooming competition, obsolete products and services are all now taking their toll on Reuters, making it look incurably ill.
For
the first time in its more than 150 years of history,
Reuters, the global giant in the electronic
financial-data delivery industry, has unveiled a pre-tax
loss to the tune of a £493 mn for the year 2002. While,
in no way, this announcement is a cause of concern or
panic, the loss was mainly due to the huge write-downs
and losses at Reuters' electronic share trading entity,
Instinet (which, many consider to be a misjudged
investment), which has been struggling to get traded in
Nasdaq and is almost at the verge of a collapse. The
loss has surprised the analysts who were tracing Reuters
for a long time and predicted that the fall of Reuters
has started, given the inability of Reuters to quickly
respond to the dynamic market's needs.
Till
1996, Reuters dominated the industry with more than 90%
share of the industry. With 40% of the world market
worth more than $6 bn, Reuters dwarfed Bloomberg, its
American rival. But since then, it is Bloomberg, which
has been running the show and in the process doubled its
market share in a span of a little less than five years
(see `Caught Napping'). Reuters has been constantly
losing its market share, both at the lucrative top end
and also at the lower end, to its competitors led by
Bloomberg. The rapid stock market downturn since the
last three years is also adding to Reuters' woes. As a
result, Reuters was forced to restructure its business
model, which included revamping of its distribution
mechanisms, cutting costs and new product introductions. |
