Thomson Reuters Corp Chief Executive Tom Glocer, under pressure from the board to improve the company's performance, said it may take until 2013 for the benefits of a recent reorganization to fully kick in.
"We're not magicians," Glocer said in an interview after the company reported a higher-than-expected rise in third-quarter profit and revenue.
The news and data provider said in September it would merge its strongly performing Professional division, serving mainly lawyers and accountants, with its struggling Markets business, which targets banks and other financial institutions.
"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 were down 1.4 percent in New York and up 0.4 percent in Toronto in a generally weaker market.
"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."
Glocer is under pressure from the board and the controlling shareholder, Canada's Thomson family, to increase its market share, particularly for its financial industry products. Sources familiar with the board's thinking said in July that he had about a year to make that happen.
As part of the shakeup, 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.
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 costs.
The company has also been hurt by the slow uptake of its new Eikon desktop product for traders and analysts.
Thomson Reuters said it had sold or migrated 32,000 Eikon desktops by the end of September, up from 28,000 three months earlier.
Adding to the thousands of job cuts in the banking industry over the past year, Credit Suisse said on Tuesday it would eliminate another 1,500 positions as it scales back its investment banking business.
"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."
Glocer said conditions remained tough in the financial markets, where competitors include Bloomberg LLC, New Corp's Dow Jones division and Factset Research.
"But That's not a good enough excuse as various competitors were still able to grow their businesses," he said in a memo to staff. The company would grow by driving sales in fast-growing markets and taking share in slower ones, he said.
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.
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 LexisNexis and products from Wolters Kluwer, 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 expects 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.
(Reporting by Jennifer Saba; Editing by Ted Kerr)