Pearson in the spotlight

March 4, 2001
Web posted at: 1017 GMT

LONDON (CNN) - Pearson unveils earnings on Monday, but what investors really want to know is how the media firm's Internet investments are bearing fruit.

The UK firm, publisher of blue-chip titles such as the Financial Times and the Economist, has been pumping money into ventures aimed at exploiting the digital age.

An update on current business conditions in December should mean the annual profit figures are little surprise to the stock market, but chief executive Marjorie Scardino needs to show her online strategy is working.

Scardino, the only woman to head a FTSE 100 company, has transformed Pearson from an unwieldy collection of disparate but upmarket assets into a focused media and education player. The company has paid big money to develop learning businesses such as Longman publishing and Simon & Schuster.

Scardino has built quite a following among investors, and over three years Pearson shares have been a good bet. However, at around 1,500 pence currently, the stock is well shy of its all-time high, reached in March 2000 of 2,302 pence.

"Looking at the bottom line numbers in a company which is changing its spots, is not highly relevant," says Anthony De Larrinaga, an analyst at SG Securities. "We're more interested in how the group is improving the value of the business for the long-term."

"We'll also be looking for information on how the National Computer Systems (NCS) acquisition is going," said JP Morgan analyst Andrew Gordon-Brown. NCS was bought in August.

Analysts told CNN.com they expect pretax profits before one-time items of £320 million-£350 million ($466 million-$508 million), compared with £401 million in 1999.

"It's still early days, but Pearson is under pressure to decide whether to give away information or to charge for it," says SG Securities analyst Anthony de Larrinaga.

Recent press reports indicated the firm was considering charging for access to its online jewel, the Web site ft.com.

The impact of the US slowdown on advertising revenues for Pearson publications will also be of interest at the results presentation.

A recent note by Goldman Sachs, however, said advertising concerns in the market had been overdone. The investment bank pointed out that advertising revenues should account for only one tenth of Pearson's revenue in 2001.