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Board Battles Presage Some Change
Rumors Have Dow Jones Selling Information Unit

By Jeffrey L. Newman
ABCNEWS.com from TheStreet.com
N E W   Y O R K �For nearly a year, the Dow Jones & Co. boardroom has been rocked by nasty fights about what to do with the company's beleaguered financial-information unit. Rumors Thursday hint that the fight is now over, and that the division will be put up for sale.
     The New York Post , that pillar of tried and true journalism, reported Thursday morning that Dow Jones' directors were looking to sell or joint-venture its financially draining Dow Jones Markets unit, suggesting potential suitors such as Reuters, Thomson, Reed Elsevier and Bridge News Service.
     "If they do it, it would be a smart move. There is a great deal of skeptism of how they would be able to make the [unit] profitable," says James Dougherty, an analyst with Prudential Securities. "Many shareholders thought it [Dow Jones] should've been sold a long time ago."

Rumors Well Received
Wall Street responded to the rumor with joyful glee, pushing the stock up 3 3/16, or 7 percent, to a new 52-week high of 49 1/16 by midday, on volume of more than 269,000�slightly above its 30-day average of 200,000.
     If the rumor is true, Dow Jones, a leading publisher of financial news and publisher of The Wall Street Journal, Barron's and other business periodicals, may have decided it was time to cut its losses and not risk spending hundreds of thousands of dollars as it watches its earnings drop steadily.
     But from a broader perspective, it suggests that financial news publishing�as an industry�may need to consolidate in order to succeed.
     "Dow Jones has a history of joint-ventures, that's a little more logical of a scenario than a flat out sale, and a lost less dramatic of a move," says Bruce Thorp, an analyst with PNC Institutional Investors. "I wouldn't think that Reuters would be allowed to buy them, from a competition stand point. And some of the smaller players could be interested, but I don't know if they could pay up. I wouldn't rule out a joint-venture at all."

Wandering `Round the Rumor Mill
And while a source at Welsh, Carson�owner of Bridge�acknowledged that the company has had conversations with Dow Jones, no one at the firm would confirm it on the record.
     In a very terse response, Dow Jones spokesman Dick Tofel, said the company "is not for sale." He didn't however, rule out a joint-venture and declined to discuss any discussions amongst the board.
     "[Selling the unit] certainly a possibility, but I didn't think they'd make a move this soon," says Steven Barlow, an analyst with Credit Suisse First Boston, who maintains a hold rating on the stock, mainly due to the uncertain future of the Markets unit. "I think it's too soon for them to say that it isn't going to work. I would be surprised if they are looking to joint-venture this soon."
     Dow Jones Markets, a global provider of news and market information, decision-support applications, trading-room systems and transaction services for financial institutions, has not done well for quite some time and has lost significant market share. It has cost Dow Jones & Co. a lot of money and hammered earnings, while all of its other businesses have enjoyed smooth sailing and profitable quarters.
     Earnings for the second quarter of 1997 came in at 36 cents, down from 56 cents a year earlier. First Call consensus anticipates 20 cents for the current quarter, ending this month, down from 33 cents a year ago. For the full year, First Call estimates earnings per share of $1.25, revised from $1.31 in March, and down from the $1.88 earned in 1996. Further, of the 18 analysts known to follow the company, none hold a buy rating. And less than a month ago, DLJ Securities lowered its rating from hold to sell.

A Big Deal for a Long Time
The company announced in February, a restructuring plan to spend $650 million to revamp the Markets unit, including renaming it from Telerate to Dow Jones Markets, and to no longer keep it proprietary. So far, it has spent roughly $250 million, and most analysts anticipate it will be a year to a year-and-a-half before it will be completely positioned to begin making money, if it can.
     Not everyone, however, is as bullish on the possibility that Dow Jones will ditch its dead wood so soon.
     "It would be a complete reversal of what the company has been touting over last year," says analyst John Morton, president of Maryland-based Morton Research. "I'd be surprised if it were true. Dow Jones needs to be in that business if they are going to be a full-service financial firm."
     But he agrees that if, in fact, Dow Jones is looking to rid itself of the dead weight, "it may be wiser to joint-venture and keep an interest. It has in the past generated healthy profits," he says. "But it all depends on who the partner is and what the terms are. If for some reason they are going to joint-venture, they'd basically be throwing in the towel. And I don't think they're read to put up the white flag."

Eyeing the Market
The real question: How many financial news wire services does the market need? Knight Ridder ditched its profitless unit a year ago, leaving Dow Jones Markets to fight it out with Reuter's and Bloomberg, along with a handful of smaller services, to fight for revenue and market share.
     "That's the real issue," says Credit Suisse's Barlow. "How do you create a product that is new and different and have some strengths in your product offering? No one has really seen Dow's new product and no one knows when it will be introduced. It definitely won't be introduced for another couple months."
     Adds Thorp, "Reuters keeps saying there's room for it. But they're the leaders. Bloomberg's and Dow's efforts are reasonably close seconds. I think there is room for all three, but beyond them it would be tough for anyone to compete."
     Whether Dow Jones takes action now or waits a few months until the newly restructured service is steadier on its feet, there is little doubt that they'll have to take some sever action to make its Markets unit work, as its competitors have year-long contracts, market share and well-grounded relationships that will be hard to ignore.

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