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Dow Jones (1996 sales: $2.5 billion) bought Telerate, which transmits bond prices, foreign exchange and other data, for $1.6 billion in 1990. It was a logical move but ultimately a poor acquisition. The unit, which last year accounted for 34% of the company's revenues, has been losing market share in the $6 billion financial-information business. "Dow Jones has been fading away," says Jim Dougherty, an analyst with Prudential Securities. "They have not kept up with the investment in technology." Bloomberg's and Reuters' terminals are technologically superior and more flexible, and they offer unique features such as historical data and analytics. And the Internet is a font of information. "There are going to be two levels of service," says Michael Bloomberg, founder and CEO of Bloomberg L.P., who once proposed merging with Dow Jones, "the high end and the low end. There is no room for anything in the middle."
The specter of a sell-off of the division or some broader restructuring has moved Dow Jones stock to its highest price since 1987; last Friday it closed at $54. Several Dow Jones insiders noted Rupert Murdoch's recent visit to Dow Jones headquarters for a meeting with Kann, and both Microsoft's Bill Gates and Buffett have privately expressed interest in the company, believing the Journal and Dow Jones brands are all underleveraged assets. Jettisoning one weak division may not be a panacea. The company will probably take an estimated $800 million write-off. And strategically it will become weaker in electronic distribution, a critical channel in the media industry's future.
Dow Jones may solve part of that strategic problem by taking a second stab at television, another distribution outlet where it has fared badly. The company is expected to announce a deal this week with CNBC under which it would provide Dow Jones' business news to the CNBC and MSNBC cable channels. Earlier this year, Dow Jones launched WBIS+ in New York City with ITT. But ITT forced a sale of the station after that company became the target of a hostile takeover by Hilton Hotels. "Our New York television adventure can only be described as a detour," says Dow Jones spokesman Richard Tofel. "It didn't get us to where we were going." But with its large shareholders showing signs of unrest, wherever the company is going, it had better get there fast.
--Reported by Aixa M. Pascual/New York