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Reed plans Net turnaround
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February 24, 2000: 8:08 a.m. ET
Stock volatile as Anglo-Dutch publisher says it will boost Web spending
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LONDON (CNNfn) - Anglo-Dutch publisher Reed Elsevier Thursday announced a cost-cutting plan which includes 1,500 jobs and said it will spend $1.2 billion to put its publications on the Internet.
The restructuring is expected to save 170 million pounds ($272 million) a year. Reed plans to spin off some non-core businesses, including OAG Worldwide, the world's largest airline directory.
The company plans to reorganize senior management to create a stand-alone Internet unit, and forecast Net-based sales of 1 billion pounds by 2002, which it says will lead to double-digit earnings growth.
The Net plans sparked a sharp rally in shares of its London and Amsterdam-listed parent companies before the stocks slid on investor fears that existing revenue streams will suffer in the short term before the Web investments are able to bear fruit.
Chief executive Crispin Davis, who took charge last September, announced the new round of restructuring that will result in 1,500 job cuts out of 26,000, mainly in the United States.
"The turnaround won't be quick but we feel positive and confident about Reed Elsevier's future. This year will be a year of significant investment and change as we start implementing the new strategy," Reed Elsevier's new CEO Crispin Davis said.
In December, Reed said it would write off 250 million pounds over two years to focus the company on three areas - business-to-business publishing, scientific and legal information. He also said then that the company would boost spending on new product development by 150-200 million pounds a year.
The announcement came as the company posted "disappointing" 1999 earnings, which it blamed on online competition and management problems. The owner of Lexis-Nexis, which in December warned investors to lower their profit expectations, said pre-tax earnings fell eight percent to 710 million pounds ($1.14 billion), or 24.4 pence per share from 773 million pounds or 26.4 pence the previous year. The 1999 figure was at the top end of analysts' reduced forecasts. Sales climbed just 3 percent to 3.39 billion pounds.
 The plans to invest 750 million pounds over the next three years to expand the online presence of its core businesses generated volatile swings in its parents' stocks. London-listed co-owner Reed International (REED) was off 4.7 percent at 583 pence at midday having initially surged to a record high of 675 pence. Amsterdam-based Elsevier was 5 percent lower at 14.02 euros, having earlier peaked at 16 euros.
"It's what the market had been hoping for and looking for, but obviously they've got to put it into effect and make it work," said Anthony de Larrinaga, media analyst at SG Securities told Reuters.
"In part it is reflected in the rise in the shares we've seen already, but I don't think anyone will be hopping off this bandwagon just yet because it has all the hallmarks of an emerging management story," he added.
Shares in both companies have rallied in the past few months following the trend set by other media players such as Reuters (RTR) and Emap (EMAP) which have climbed sharply this year on plans to step up their Internet activities. 
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Reed Elsevier
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