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Thursday, July 23, 2009

He Loves Me, He loves me not, He loves me...

It now appears that Reed Elsevier is not going to sell RBI after all. The new CEO, Ian Smith, has worked out that there are some assets inside RBI that are worth keeping. Total Jobs is having a hard time in the recession but when the economy recovers demand for job advertising will once again increase. Providing Total Jobs doesn't get overtaken by an emerging technology solution, it will prove to be a long term profitable business.

He also likes the data business ICIS, whish serves the chemicals/petro sector. Assets which he can't cross exploit with other Reed assets may yet be sold.

The risk here is that Reed will not be brave enough and end up selling a handful of assets. If the core of RBI is to be retained a radical pruning is required. This is not only about trimming assets, it should also be about a fundamental change in the way Reed does business. Getting rid of half the assets wouldn't be amistake. Not only would this allow RBI to focus on a small number of markets (in the 21st Century media world where we have to be experts in many things not just publishing we might be wise to chose between doing a feww things in many markets or many things in a very few markets) but it should also change the way in which its its overhead base is scaled.

It would bei n the best interests of shareholders if Smith pressed his team to carve out some of the stronger assets as well as just those it considers weak. In other words, RBI should not keep assets just because they still look profitable, but only keep those where it believes it can extract substantial strategic value.

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