Thomson Reuters Corp (TRI.N)(TRI.TO) posted improved third-quarter results, though CEO Tom Glocer said a recent reorganization would take until 2013 to drive revenue growth at the news and data provider.
The company reported stronger sales to legal, tax and accounting professionals that helped overall results beat Wall Street forecasts.
But growth remained subdued in the Markets division catering to banks and other financial institutions, which have been laying off tens of thousands and cutting costs.
Glocer also said sales of the company's flagship Eikon desktop product had disappointed in some areas, such as investment management.
"We're not magicians," Glocer said in an interview on Tuesday. "In a recurring subscription business like ours, if we do a good job this fall ... it should turn into better sales next year in Markets. And then that really doesn't roll through (to revenue) until 2013."
Thomson Reuters, which affirmed its 2011 outlook, did not provide forecasts for 2012.
The company's controlling shareholder, Canada's Thomson family, has been concerned about the performance of the Markets division, people familiar with the thinking of the board said in July. Glocer has been given about a year to accomplish a turnaround, the sources said at the time.
Glocer announced in September that Thomson Reuters would merge its strongly performing Professional division, serving mainly lawyers and accountants, with its Markets business.
As part of the shake-up, Jim Smith, the former head of the Professional division, was elevated to the new role of chief operating officer in September, putting him in a strong position to succeed Glocer.
"We expect the benefit of these changes will improve sales performance in 2012 and benefit 2013 revenue growth," Glocer said in a statement accompanying the earnings release.
Thomson Reuters shares, which have fallen about 30 percent from their highs this year, fell 2.2 percent in New York but ended 0.7 percent higher in Toronto in overall weaker markets.
"What is clear at this point is that 2012 will not look particularly good," said Claudio Aspesi, an analyst at Sanford Bernstein & Co in London.
"Things are going to get worse before they get better... even 2013 is a statement of optimistic faith in a recovery."
Thomson Reuters reaffirmed its outlook for 2011 as its margins improved. Still, the Markets division, which accounts for about 58 percent of overall revenue, posted revenue growth of just 1 percent as banks continued to slash jobs and Europe's debt crisis spooked markets.
Credit Suisse CSGN.VX said on Tuesday it would eliminate another 1,500 positions as it scales back its investment banking business.
"Conditions were challenging in some of our markets, but that's not a good enough excuse as various competitors were still able to grow their businesses," Glocer said in a memo to staff. The company's competitors include Bloomberg LP, News Corp's (NWSA.O) Dow Jones unit and Factset Research (FDS.N).
Thomson Reuters said it had sold 32,000 Eikon desktops as of the end of September, including migrations, up from 28,000 at the end of June and 19,000 at the end of March.
Glocer said an "important" upgrade planned for year-end would improve functionality and performance.
Thomson Reuters reported third-quarter revenue of $3.26 billion, up 5 percent before currency changes. Analysts had expected $3.23 billion, according to Thomson Reuters I/B/E/S.
"I think the sentiment heading into the quarter was pretty negative and these results were better than what people were expecting," said an analyst at a major Canadian bank. "Some investors thought the 2011 guidance would be cut."
"If things in Europe don't pan out (Thomson Reuters) will be impacted for sure," the analyst added.
Revenue in the Professional division, which accounts for 42 percent of overall revenue, increased 10 percent after growing 8 percent in the second quarter. The 1 percent revenue growth in the Markets division was unchanged from the second quarter.
The company said the Professional division, which competes with Reed Elsevier's ELSN.AS LexisNexis and products from Wolters Kluwer (WLSNc.AS), has sold WestlawNext to more than 29,000 customers since it was launched in February 2010 and now represented 46 percent of Westlaw's revenue base.
Overall adjusted earnings per share rose to 56 cents from 45 cents in the same quarter last year. Analysts had expected earnings of 53 cents per share.
Thomson Reuters said it still expected revenue to grow by a mid-single-digit percentage rate in 2011.
The company's underlying operating margin improved to 22.0 percent, from 21.2 percent a year earlier.
Revenue in Europe, Middle East and Africa was flat in the quarter. Revenue in Asia rose 2 percent while the Americas increased 1 percent.
Thomson Reuters shares fell 2.2 percent to $29.02 in New York. The Toronto-listed shares closed 0.7 percent higher at $C29.70.
(Reporting by Jennifer Saba; Editing by Tiffany Wu and Ted Kerr)