Pearson's CEO, Marjorie Scardino, will step down after 16 years and be replaced by the head of its international education business, spurring speculation the company may sell the Financial Times newspaper.
John Fallon , 50, will replace Ms. Scardino, 65, starting in January, the London-based company said today. The first female CEO of a major U.K. company, Ms. Scardino was made a Dame of the British Empire in 2003 and almost tripled Pearson's sales during her tenure.
Ms. Scardino, who took over as chief in January 1997, has been expanding Pearson's education business while pushing digital versions of books, journals and newspapers to counter the stagnating sales of print products. Her departure raises questions over whether the Financial Times Group, which owns the newspaper and a 50% stake in The Economist, will be sold, said Ian Whittaker, an analyst at Liberum Capital.
"Marjorie Scardino was a big fan of the group; John Fallon has no emotional commitment," Mr. Whittaker said. Pearson's difficulties with its U.S. education business, with a "likely second year of like-for-like decline and no signs of a turnaround" may have been the signal for Ms. Scardino to exit "while the going is relatively good," Mr. Whittaker said.
In July the company reported a 9.6% drop in operating profit for the first half of the year as income from its professional training business declined.
Potential buyers for the Financial Times could be Bloomberg, News Corp. and Thomson Reuters, said Alex DeGroote, a media analyst at Panmure Gordon & Co. in London. "The Financial Times is worth a lot more to someone else than Pearson," he said. "With the Financial Times, it's all about the value of the brand, and the FT is the classic trophy asset."
Bloomberg would be an obvious buyer because it already has print operations with its Businessweek magazine, while News Corp., which is in the process of splitting off its publishing holdings, could use the Financial Times as an important part of that new business, DeGroote said.
Representatives for Reuters, Bloomberg and News Corp. either declined to comment or couldn't immediately be reached. Bloomberg LP, the parent of Bloomberg News, competes with Pearson's Financial Times in providing financial news and information.
The Financial Times Group accounted for 7% of revenue for Pearson last year, while education made up 75% and 18% came from the Penguin book publisher.
"We question whether Penguin and the Financial Times Group fit strategically, given Pearson's skew to education," said Steve Liechti, a media analyst at Investec Securities in London. "Fallon is not a life-long publisher, so [he] could be more brutal in his strategic direction in time." Mr. Liechti values the Financial Times Group at about 750 million pounds (or about $1,206 million dollars).
Asked about the fate of the Financial Times, Mr. Fallon said on a conference call today that the newspaper is "highly valued and a very valuable part of Pearson."
Mr. Fallon has been chief of Pearson's international education unit since 2008. "With more than 15,000 people in 70 countries, this division is fundamental to Pearson's growth strategy," the company said. Since Fallon took over, international education sales increased to 1.4 billion pounds from 322 million pounds.