The tumult in the financial world has hit Mayor Mike Bloomberg’s company, Bloomberg LP, where it really hurts — in terminal sales.
During a video broadcast to the company’s 15,000 employees, Chairman Peter Grauer conceded that the company grew its terminal business by only 1,000 units in the first nine months of 2012.
By contrast, Bloomberg installed 13,763 terminals in 2011, short of its 15,000 goal.
The slowing growth is unsettling to insiders because at least 50 percent of an employee’s bonus is contingent on how well the overall company has done. Slim terminal sales will mean smaller bonuses, which are dispensed in February.
The company is still highly profitable, but the days of double-digit growth appear to be over.
Revenues are expected to be up modestly from just over $7 billion last year to less than $8 billion this year, according to one source.
Grauer did not mention the financial picture in his video but an insider said that the company has about 315,000 terminals installed globally.
The terminals, sold to Wall Street analysts at an average cost of $20,000 a year, are the center of the financial news and information company, bringing in an estimated $6.2 billion and enabling the privately held information giant to keep afloat its media ventures, such as Bloomberg Businessweek, which operates in the red.
The portion of the bonus based on company performance is, in Bloomberg lingo, known as a “Cert,” and it is based on net terminal sales and non-terminal revenue growth.
CEO and President Dan Doctoroff conceded the company overestimated the strength of the market by a wide margin.
“At minimum, the Cert will pay out at 20 percent of target,” he said, although he did acknowledge that the company will try to throw some additional funding into the cash bonus pool to somewhat compensate employees on the other 50 percent of the pool.
But Doctoroff does believe in crimping when the company as a whole is missing its mark.
“We also do believe very strongly that we benefit when we beat expectations, and we all take something of a hit when we don’t,” he said.
Grauer explained: “If you look at where that growth is coming from, unfortunately, the big sell-side firms are still contracting and cutting head count, losing jobs. They represent about 39.3 percent of our installed base around the world.
“But if you look at the buy side, which is over 60 percent of our installed base, they’ve been growing at about 2.7 percent,” Grauer said.
Non-terminal revenue growth has also been missing its estimates by a wide margin as the company invests in new services such as Bloomberg Law, Bloomberg Government and Bloomberg Sports.
The Sports unit took on a joint venture partner, IMG, to help offset its investment needs.
Doctoroff said that he would not rule out shutting down some of the unprofitable units — which is generally something that the old Bloomberg traditionally avoided. But he did not offer any specifics on what, if anything, might be closed.
“I can’t commit to say we’ll stay with all of them,” said Doctoroff. “We’ve invested a lot in them. Some things you try and they just don’t work, but overwhelmingly we believe that the businesses that we’ve started, the prospects for them way more than justify the investment that we’ve made.”
Book talk
The two biggest publishing houses in the US, Random House Inc., owned by German media giant Bertelsmann, and Penguin, owned by London-based Pearson, are talking merger.
“Pearson confirms that it is discussing with Bertelsmann a possible combination of Penguin and Random House,” a Pearson statement said.
A story in the Financial Times, which is owned by Pearson, first reported the talks.
“The two companies have not reached agreement and there is no certainty that the discussions will lead to a transaction. A further announcement will be made if and when appropriate.”
In 2011, Random House had revenue of about $2.2 billion, while Penguin Group had sales of $1.7 billion.
Together, the companies would have US revenue of about $1.8 billion, according to Publishers Weekly.
That would give them about a 16 percent share of the trade market, based on BookStats industry estimates of trade sales of just under $12.5 billion (excluding religion).
Reed Phillips, a media investment banker, said, “I think you are going to see more of this type of deal across all print media, as companies consolidate to get scale.”
The FT points out the two companies may combine for 25 percent of the British and American publishing market and could draw scrutiny from antitrust regulators.
The biggest losers may be authors and literary agents. “There is a lot of unhappiness among literary agents,” said one industry executive. “It means one less potential bidder for their authors.”