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Thomson Reuters Markets revenue inches up in Q2

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Thomson Reuters Corp. (TRI-T) reported sluggish growth in its Markets division, as the company struggles to accelerate adoption of its new Eikon flagship desktop for financial professionals.

The second-quarter results released Thursday come on the heels of a management shakeout that resulted in the departure of Markets divisions chief Devin Wenig and several other high-level executives last week.

Thomson Reuters Chief Executive Thomas Glocer has now taken direct responsibility for the division's turnaround.

In the Markets division, which competes with Bloomberg LP, News Corp's Dow Jones and FactSet Research, revenue excluding the impact of currency changes rose 1 percent from a year earlier, slowing from the first quarter's gain of 2 percent.

Overall revenue and earnings per share were within the ranges Thomson Reuters announced last week, when it was clear that improving the performance of the Markets division was a priority for the board and controlling shareholder, Canada's Thomson family.

Glocer described the results as "healthy," but noted this was due to strong growth in the Professional division serving legal, accounting and other professionals. That unit's revenue rose 8 percent excluding the impact of exchange rate changes.

"Nonetheless, revenue growth in our Markets division is below our expectations, and I have decided to accelerate the transformation in Markets," Glocer said in a statement. "I am confident that these changes will result in improved performance."

Paul Sullivan, an analyst at Barclays Capital in London, noted that organic growth in the second quarter had slowed from the first quarter.

"It is clearly disappointing and clearly a reflection of the market environment in which they operate," he said. "It's also clear the take-up in new products is somewhat slower than probably the company and the market has envisioned."

The Markets division's organic revenue growth, which strips out divestitures, acquisitions and currency changes, was flat in the quarter compared with a gain of 1 percent in the first quarter.

Total revenue excluding divestitures was $3.20 billion US, up 4 percent before currency adjustments. Adjusted earnings per share rose to 51 cents from 41 cents. The average analyst forecast was for revenue of $3.16 billion and earnings per share of 49 cents, according to Thomson Reuters I/B/E/S.

SLOW MIGRATION

Thomson Reuters said its operating margin rose to 20.9 percent from 19.5 percent in the same quarter a year ago, due in part to continued merger savings and currency benefits.

Many of the company's financial clients are still recovering from the economic crisis, with job cuts and pullbacks in spending. This is hindering sales of Eikon, which is aimed at knitting together dozens of disparate products after Thomson Corp's acquisition of Reuters Group Plc in 2008.

The company said it had sold more than 28,000 Eikon desktops since the launch in September 2010, of which only about 3,500 are to new users.

That means that of the company's roughly 500,000 financial markets users, only about 24,500 have migrated to Eikon.

Overall Markets division revenue rose 5 percent in Asia and 2 percent in Europe, Middle East and Africa but fell 1 percent in the Americas.

The Markets division's organizational changes have thrown into question how quickly Thomson Reuters can fast-track growth in the unit, which accounted for 59 percent of the company's revenue in the second quarter.

Glocer is preparing a plan to boost the division's revenue growth rate and plans to present it to the board in the next two months. He will have about a year to make it work, according to several people familiar with the board's thinking.

Thomson Reuters reaffirmed its outlook, saying it expected revenue to grow in the mid-single digits in 2011.

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