Heck of a Week at Thomson Reuters Legal!!

Whether you like ‘em, hate ‘em, or just don’t care about ‘em… you have to admit that it has been an exciting week for the folks in Eagan, Minnesota. Let’s just step back and break down what happened this week:
11/16/2010 –  Major outage of Thomson Reuters online products (Westlaw, WestlawNext and more)
11/17/2010 –  Word of layoffs start coming in for members of the West Library Relations Management team.
11/17/2010 –  Turns out not just the West LRM team is effected… 60 total employees are cut.
11/18/2010 –  We get a letter from Chris Cartrett explaining the layoffs and TR Legal’s plans on moving forward.
11/18/2010 –  BARBRI sends out a letter announcing that TR Legal is exploring selling off BAR/BRI.
11/18/2010 –  TR Legal announces that it is buying Pangea3, an Indian Legal Process Outsourcing firm for $35-$40 million.
Now, we’ve been hearing mumblings all this week about the layoffs, and apparently, the 60 mentioned may be some creative accounting on the part of TR Legal. We’ll have to see once the dust has settled if it turns out that more folks were let go that may not technically count as “layoffs.” I also found it interesting that one of the comments that came out of TR Legal’s Scott Augustin, was that TR Legal is going after the one- to three-attorney law firms for its business. I wish my solo and small firm friends the best of luck on that!!
The news about the Pangea3 LPO purchase is one that may not have hit the radar of the mainstream law firm or law library world, but trust me on this… this may be the biggest news of the week, and it may have a ripple effect for months or years to come. Again, we’ll have to see what happens when the dust settles.
A friend of mine that recently returned from Greece, Tottie Keal (you may remember her as Tottie Degaitas) and pointed out a few substantial statements that Thomson Reuters made in its November 6K filing. The areas of concern are that:
1.      Print subscriptions are at historic lows (probably going to get worse)
2.      Law firms are watching expenses and are not using online databases that are outside of their contracts.
3.      It seems that Thomson Reuters had a sizable risk in the foreign currency market, and took a bath from losses in the British Pound and the Euro.
Here’s the section of the 6K:
For the three months ended September 30, 2010, revenues from subscription offerings, which include Westlaw and other businesses, increased 8%. Subscription growth was led by our international businesses which increased 14%, (including contributions from Revista dos Tribunais and Canada Law Book, which we acquired in May and August 2010, respectively), Intellectual Property which increased 7%, and FindLaw which increased 23% (including contributions from Super Lawyers, which we acquired in February 2010). Increases from subscription offerings were offset by lower print and non-subscription revenues, which each decreased 4%. However, the print attrition rate has slowed substantially from the prior year period and is nearing historical levels. The moderate decline in print also reflected that the first half of 2009 benefited from some favorable timing. Within our non-subscription businesses, revenues from trademark searches increased, however, we continued to experience double-digit declines in Westlaw ancillary revenues as customers continue to monitor spending above their base subscription contracts. In the nine-month period, subscription revenues increased 5%, while print and non-subscription revenues declined 10% and 5%, respectively.
Our operations are diverse and global in nature and therefore expose us to foreign exchange risk related to cash flows in currencies other than the U.S. dollar, in particular to the British pound sterling and the Euro.
In 2010, we implemented a program to mitigate our foreign exchange exposure by entering into a series of foreign exchange contracts to purchase or sell certain currencies in the future at fixed amounts. These instruments have not been designated as hedges for accounting purposes. As such, we recognized losses of $32 million and $4 million, reflecting the change in the fair value of these contracts, within “Other finance income (costs)” for the three and nine months ended September 30, 2010, respectively. The cumulative notional amounts of contracts outstanding at September 30, 2010 were $385 million to sell Euros, $227 million to buy British pounds sterling and $110 million to sell Japanese yen. These arrangements settle at various dates over the next 12 months and represented a net liability at fair value of $10 million at September 30, 2010, which was included within “Other financial assets–current” and “Other financial liabilities-current” in our statement of financial position. We may enter into additional derivative financial instruments in the future in order to mitigate our foreign exchange risk. See note 20 of our 2009 annual financial statements for additional information. (emphasis added)
Thomson Reuters is a huge muti-billion dollar company, so this is a little blip on the radar screen for them. However, for those of us having to deal with Thomson Reuters “Legal” group, these shakeups, layoffs, acquisitions, losses and trends are something that remind us that the days of dealing with our friends at “Westlaw” are long gone. 

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Anonymous said...

Very informative piece on TR


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