Thomson Reuters financial sales turn corner; company cuts jobs

Reuters

By Jennifer Saba

Oct 29 (Reuters) - Thomson Reuters Corp said on Tuesday that new sales of its financial terminalsoutpaced cancellations in the third quarter for the first timesince 2011, and it announced 3,000 job cuts to reduce costs.

The global news and information company's stock rose morethan 2 percent to hit a two-year high on optimism that thepositive turn in net sales will translate into stronger revenuegrowth next year, since terminal subscriptions are signed on anannual basis. Thomson Reuters also announced a $1 billion sharebuyback program.

"Clearly what we are seeing is progress on the turnaroundefforts at Thomson Reuters," said Piper Jaffray analyst PeterAppert. "Getting back to positive net sales was significant."

Still, revenue rose just 2 percent in the third quarter,underscoring a tough business climate as banks and law firms cutjobs and curb spending.

Appert acknowledged that the company still faced challenges."It's not out of the woods, but it's definitely moving in theright direction," he said.

Thomson Reuters has lost market share to Bloomberg LP sincethe financial crisis, mainly due to weakness in its businesscatering to financial institutions, which accounts for more thanhalf of revenue. It has undergone a series of structural changesduring this time.

The company announced a $350 million charge to accelerate acost-saving plan and eliminate about 3,000 positions, mainly inits Financial & Risk division. Including other jobs that werecut earlier this year, Thomson Reuters' workforce of 60,000 willbe reduced about 9 percent.

"I think everybody in the world is trying to do more withless," Chief Executive Jim Smith said.

When asked about the outlook for net sales in the currentquarter, Smith said the fourth quarter was typically "difficult"as banks usually trim staff near the end of the year.

"I don't think the pressure on costs and keeping them undercontrol is going to lessen," Smith said. "That said, what I hopeis this strategy gives us a more predictable path in thefuture."

Smith said the company would pare back its acquisitionambitions and deploy some of its cash toward the $1 billionstock repurchase program. During the third quarter, it boughtback about 2.9 million shares for about $100 million.

Moody's Investors Service on Tuesday lowered Thomson Reuterssenior unsecured rating to Baa2 from Baa1 on the share buybackand higher leverage target.

PROFIT DOWN 37 PERCENT

Thomson Reuters said its third-quarter ongoing revenue rose2 percent before currency changes to $3.07 billion, largely inline with Wall Street estimates.

Excluding businesses that have been sold and other items,the company reported a profit of 48 cents per share, flat with ayear earlier and beating the analysts' average forecast by 4cents.

Net income fell 37 percent from a year earlier to $283million, due in part to a lower tax rate and businesses thathave been divested.

"They still have their work cut out for them," EvercoreResearch analyst Doug Arthur said. "They are doing all the rightthings, but the environment is not cooperating with them."

The company said that to date it had installed more than100,000 Eikon desktops, its flagship product for financialinstitutions. That is up from 61,000 at the end of June.

The Legal Division, which includes the flagship productWestlawNext, reported a 3 percent increase in revenue to $843million. But stripping out acquisitions, revenue fell 1 percenton weakness in its print business and in Latin America.

Canada's Thomson Corp bought Reuters Group Plc in 2008 for$17 billion, creating a company that serves financial, legal,tax, accounting and other professionals.

Thomson Reuters said Tax & Accounting revenue jumped 10percent to $270 million, benefiting from a rise in subscriptionsand strength across all of the business segments exceptGovernment.

The company also announced plans to make contributions ofabout $500 million to its U.S. and British defined benefitpension plans this quarter.

Thomson Reuters affirmed its outlook for the year, excludingthe impact of the cost-saving charge and pension contributions.It expects revenue in 2013 to rise at a low single-digitpercentage rate and earnings before interest, taxes,depreciation, and amortization margins, excluding special items, of 26 percent to 27 percent.

Thomson Reuters shares were up 2.4 percent in afternoontrading at $36.60 in New York and C$38.27 in Toronto. The stockhas risen more than 25 percent over the past 12 months.

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