Bertelsmann boosts profits, eyes growth

Exiting ISP biz, investing elsewhere online

BERLIN — Net profits at German media giant Bertelsmann climbed 45% to $584 million for the fiscal year ended in June, buoyed by asset sales and the initial public offerings of subsids Lycos Europe and Internet outfit Pixelpark.

Revenues rose 25% to $14.3 billion as chief financial officer Siegfried Luther cited internal growth and the first-time consolidation of TV group CLT-Ufa.

Execs said Wednesday at a meeting in the company’s headquarters in Hanover that Bertelsmann is exiting the Internet service provider business and will be selling off its remaining stakes in AOL Inc., AOL Europe and MediaWays. At the same time, the company will invest about $3.1 billion elsewhere online in the next three years to grow assets like search engine Fireball and online bookseller BOL.

Tech ambitions

CEO Thomas Middelhoff said that as the Internet and digital technology roars ahead, the company is facing one of the most challenging periods in its history.

Bertelsmann will launch a new venture capital fund called eBertelsmann with about $1 billion in initial investment money. Execs also said they have another $13 billion, a very hefty war chest, to spend on acquisitions overall.

They said about a third of Bertelsmann’s revenues came from each of the company’s three major markets: the U.S., Germany and the rest of Europe.

The book division posted sales of $3.75 billion, up 2% over last year. Magazine publisher Gruner+Jahr saw sales grow 6.4% to $2.5 billion.

In the U.S., Bertelsmann owns publisher Random House.

Music finds groove

Music group BMG Entertainment saw revenues rise 16% to $4.2 billion, while CLT-Ufa made $1.4 billion in sales, up 4%. Bertelsmann recently merged its TV and radio businesses with Pearson of the U.K. Middelhoff also said he’d like the RTL Group — in which Bertelsmann has a 30% stake — to boost its stake in Britain’s Channel 5.

Arvato, Bertelsmann’s printing services division, grew revenue by 15% to about $2 billion.

Execs expressed interest in getting access to capital markets, saying Bertelsmann was in the process of getting rated by two major corporate bond ratings agencies. “It’s difficult to raise more than 500 million euros without a rating,” Luther said.

Bertelsmann is not publicly traded. Execs plan to meet with reporters Stateside in New York today.

(Jill Goldsmith in New York contributed to this report.)

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