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Reed Elsevier CEO change
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- Date: Wed, 11 Nov 2009 13:19:10 -0500 (EST)
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Breaking news . . .
LONDON (Reuters) - Reed Elsevier's chief executive, Ian Smith, has resigned because he was wrong for the times, the publisher said on Wednesday, replacing the industry outsider with a proven company insider, Erik Engstrom.
Smith, just eight months in the job and known for transforming companies, will be replaced immediately by the head of Elsevier, the company's scientific-publishing division.
Reed Elsevier also said 2010 operating margins would likely fall slightly, due to a weak revenue environment combined with increased investment, particularly in U.S. legal markets.
Its shares were down about 6 percent in a 1 percent lower European media sector, as investors worried that the company may have lost its way after being seen as a safe bet for a decade when led by Crispin Davis, Smith's predecessor.
"Ian and the board decided it wasn't the right role for him in the current economic circumstances. Erik has proven sectoral experience. There is no disagreement on strategy," a spokesman for the Anglo-Dutch company said.
Smith, 55, who divided investor opinion with an August rights issue and ambitious investment plans, was not available for comment.
Dutch brokerage Petercam cut its recommendation to 'hold' from 'buy' on the margin forecast, although other analysts said they were unsurprised by the guidance.
"The new CEO will likely have solid backing but first will have to calm the unrest and prepare the company for renewed growth after 2010," Petercam said in a note.
Engstrom, a 46-year-old Swede who rarely speaks in public, has been chief executive of Elsevier -- the group's least cyclical and most profitable division -- for five years.
He previously worked at private equity firm General Atlantic Partners and book publisher Random House, and was a director of Swedish paper-products firm SCA.
Reed Elsevier chairman Anthony Habgood said Engstrom was "well suited to lead Reed Elsevier, to create value for our shareholders and to deliver growth as economic conditions improve." Habgood has been chairman since June.
Smith was chosen over internal candidates to succeed the stiff upper-lipped Davis late last year. He had held senior roles at Royal Dutch Shell and General Healthcare Group, and was briefly CEO of Taylor Woodrow.
His role in guiding builder Taylor Woodrow through a merger with George Wimpey, and his previous experience as a management consultant, fuelled hopes when he was appointed that he might lead the takeover of a rival.
Giasone Salati, analyst at brokerage Execution, said: "Ian Smith's strategy of investing 'tens of millions' to restore was a radical change from the previous policy of margin expansion.
"He is also known for radical solutions, and the appointment of an internal successor might suggest that the board would not support a transformational deal."
Smith had made a strong case for accelerating investment, particularly in the U.S. legal market, where Reed has been losing market share to Thomson Reuters.
In July, he said: "Despite the global recession, I believe that now is the right time to develop more aggressive market and product strategies to capture the market opportunities and increase competitive differentiation."
Reed said on Wednesday first-half trends had continued as expected in the second half, with advertising and promotion markets and employee screening remaining difficult but likely to stabilise as comparatives get easier.
"The major professional markets, accounting for the majority of Reed Elsevier's business, are proving more resilient than most but not immune from late cycle pressures given the subscription nature of much of the revenue," it said.
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