FALLON FALLING: Once-mighty publisher Pearson has been struggling financially, and the latest gloomy forecast could cost CEO John Fallon his job. The company issued a profit warning on Jan. 18, saying it “no longer expect[s] to reach our prior operating profit goal for 2018.” Fallon had set a profit target of £800 million for that year.
Overall revenues for 2016 are expected to dip 8 percent from the previous year. The company attributes a chunk of the problem to the North American higher-ed market, where revenues plunged 30 percent in the fourth quarter and 18 percent for the full 2016. Among the reasons it offered: lower community college enrollment and growth of textbook rentals.
Still, Pearson remains committed to its transition from a print publisher to provider of digital learning services—a journey that Fallon has steadfastly kept to since taking the reins in 2012. It will invest an additional £50 million (approximately US$61.7 million) in its digital courseware services, and slash eBook rental prices by up to 50 percent.
As expected, the news was poorly received in the markets. At time of writing, Pearson’s stock on the London and NYSE exchanges have both dropped nearly 30 percent since the announcement.
To get more cash, Pearson also considering selling its 47 percent stake in Penguin Random House; the deal could be worth as much as £1.2 billion, reports Bloomberg. The company had already sold the Financial Times and its stake in The Economist in 2015 for an estimated $2 billion.