Magic Madge keeps Pearson in the Pink

January 24, 2007

Shares of the Pearson publishing group hit a five-year high this week. City analysts upgraded its prospects. CEO Dame Marjorie Scardino has received the brickbats in its years of decline and now earns the plaudits in its renewal. Rumors persist that the Financial Times remains an attractive target for an asset raider. Will Dame Marjorie stay to savor the fruits of success, or will she became a hostage to the fortunes of The FT, whose pink pages have come to symbolize the early-morning reading matter of City commuters?

When shares at the Pearson group hit a five year high this week, city analysts upgraded its future prospects. CEO Marjorie Scardino also celebrates ten years as leader of the publishing group, and her sixtieth birthday. Have a nice one, Lady M.

Only FT100 female CEO

It has been a turbulent ten years. Marjorie Scardino was the first woman to lead a major (Footsie 100) company. In her early time as leader, she put in place a policy of disvesting non-core assets (such as the high profile Madame Tussauds). She was lauded in the city, and Pearson shares started to pick up. But the gain occurred during the dot-com boom. Shares rocketed, and then equally rapidly fell precipitously. Her big investment in acquiring National Computer Systems (NCS) at the peak of the boom was particularly criticized as an expensive error of judgment. Scardino’s personal stock also slumped.

Courageous moves

Critics identified the Financial Times as a source of volatility at Pearson’s, and its sale a possible opportunity for consolidation. Scardino linked her future to retaining the FT, as her ‘over my dead body’ quote indicated. The unspectacular recovery of the share price four years had just about fended off the criticism of City analysts.

The current reappraisal reveals that the decision to acquire NCS was as shrewd as retaining it was courageous. It places Pearson at an advantage over other media rivals such as Reed Elsevier who have not invested as thoroughly in educational technology.

Is Pearson’s future stabilized?

Possibly not. The thrust of criticism remains, that the group’s assets are not integrated (that unlovely buzz-word) to deliver synergies (that even uglier buzz-word). As recently as last year, new Chairman Glen Moreno indicated his concerns on the UK’s operating structure and performance. Critics see the potential for asset raiding. And the jewel in the crown is the FT. Other much loved brands such as Penguin are also vulnerable.

Is Dame Marjorie vulnerable?

Possibly. Chairman Glen Moreno says the company has no succession plans in hand for her job. A lingering doubt remains. ‘Back me, back my brand’ was her watchword over the FT. Which also translates to predators as ‘Ditch the Bitch, and Deliver the Brand’. In which case, the Private Equity poker players will be doing a good job at losing a good leader, which are hard to find. Scardino’s protégé Rona Fairhead head of the FT group also becomes vulnerable. The winners in such a battle are likely to end up with the leader they deserve.