Bertelsmann executives last week announced that the company's ownership of the online bookselling venture BOL will be "phased out" as part of its strategy to focus on core businesses. Those businesses include book publishing, which Bertelsmann CEO Gunter Thielen said the company plans to strengthen, and book and music clubs, which Thielen said Bertelsmann is committed to turning around.
Bertelsmann will exit the online bookselling business either through a sale of BOL, which operates in Germany, Sweden, Switzerland and the Netherlands, or by simply shutting it down. "As a retail enterprise, BOL will not be able to meet Bertelsmann's return targets in coming years," the company stated.
BOL is part of the DirectGroup, which lost 119 million euros in the first six months of 2002 on revenues of 1.37 billion euros. Although few details were provided, the company said its book club operations in France, Spain and the U.S. (Bookspan) are profitable "and prove the viability of the membership-based business model." A Bookspan spokesperson said the company is "on track to meet its 2002 financial goals." The loss in the segment was attributed largely to Bertelsmann's e-commerce activities, including BOL. Thielen explained the retrenchment in the Internet area by noting that "after years of dynamic growth and exceptional gains from the Internet sector, Bertelsmann is now in a brief period of consolidation. The primary objective is to boost the operational performance of Bertelsmann's core businesses."
One of those core businesses is Random House, which reported worldwide revenues of 1.01 billion euros ($990 million) and operating profits of 68 million euros ($66.6 million) in the first six months of the year, giving the publisher a 6.7% operating margin. The financial details supported claims made by Random House chairman Peter Olson in his mid-June letter to employees that the publishing company was on track to meet its financial goals for 2002 (News, July 1). Comparisons with the first six months of 2001 were not available, but the results were better than the last six months of 2001, in which Random lost 15 million euros on sales of 1.08 billion euros (News, June 17).
Random spokesperson Stuart Applebaum said the company was "gratified" by the six-month results, noting that the publisher's North American and other English-speaking divisions in particular had a "very strong" performance. He reiterated that Random "is on plan to meet our full fiscal 2002 targets" and noted that the operating margin in the U.S. was "substantially better" than the companywide mark of 6.7%.
In other segments, revenues at BertelsmannSpringer, the company's professional publishing unit, which Bertelsmann is looking to divest, were 359 million euros in the period, with operating profits of 26 million euros. At Arvato, Bertelsmann's printing and media services segment, operating profit was 44 million euros on sales of 1.67 billion euros.
