Dow Holders Take Management to Task
The Dow Jones & Co. annual meeting, normally a quiet, family-and-friends affair, drew a crowd of 500 to the World Trade Center on Wednesday as dissident shareholders questioned management’s decision to invest $650 million in a struggling electronic-information unit that one of the critics called “a black hole.”
The rancor that some had predicted for the session failed to emerge, possibly because two key dissidents--members of the Bancroft family, which controls 70% of the voting power in Dow Jones--opted not to address shareholders.
However, a representative of money manager Michael Price, whose firm holds a 5% stake in Dow Jones and who strongly opposes management’s plans for the ailing unit, said Price is “not going away” and will buy more shares if the price falls.
Price, who runs the Franklin Mutual Series funds, is an activist investor whose pressure on under-performing Chase Manhattan Corp. resulted in the company’s 1986 merger with stronger Chemical Bancorp.
Dow Jones, parent of the Wall Street Journal, has missed out on the bull market of the 1990s. Its stock price has mainly bounced between $30 and $40 a share since the stock-market crash of 1987, although it did hit a recent high of $45.125 on March 6. The shares closed Wednesday at $39.125 on the New York Stock Exchange, down 50 cents.
Under prodding by Price and other dissidents, Dow Jones nominated--and on Wednesday elected--four new members to its board of directors: American Express Co. Chairman Harvey Golub, Bankers Trust New York Corp. Chairman Frank N. Newman, Pfizer Inc. Chairman William C. Steere Jr., and Leslie Hill, a pilot for American Airlines and a Bancroft family member.
The subsidiary at the center of the controversy is Dow Jones Markets, formerly called Telerate, which supplies securities data and analysis mainly to traders and other market professionals. Dow Jones bought the business seven years ago for $1.6 billion, but some of the critics think it may be worth less than half that much today.
The unit’s problem, as Dow Jones Chairman Peter R. Kann acknowledged to shareholders, is that it failed to upgrade its products and lost market share to competing systems belonging to Reuters and Bloomberg.
Dow Jones Markets suffered a 20% drop in operating earnings last year, and the slide has only gotten worse this year. Operating earnings at the unit plunged nearly 84%, to $7.47 million, in the first quarter of 1997 compared with the year-earlier period. Revenue dropped more than 5%, to $229 million.
The poor results dragged Dow Jones’ first-quarter earnings down 42%.
In recent weeks, Dow Jones has announced several new initiatives for the unit, including a joint venture with Microsoft Corp. Kann said the proposed $650-million investment will involve bolstering the system’s database of historical financial information and improving its analytical capabilities. He added that management is “not emotionally attached” to the unit.
Hedge-fund manager James Cramer, who holds more than 1 million Dow Jones shares, told shareholders that the company ought to sell the unit, which he called “a bottomless pit” that could cost billions of dollars to put right. Continuing to pump money into the business could so weaken Dow Jones that it would make it ripe for a takeover, Cramer said.
Although Reuters, for one, has been mentioned as a possible buyer for Dow Jones, most of the controlling Bancroft family remains closely allied with management.
