Sale of stake in retailer HMV also likely
LONDON — Shares of British music major EMI surged by nearly 4% Friday on reports that the company is poised to announce 1,000 job cuts at EMI Recorded Music as part of an aggressive restructuring plan.
Move, expected Wednesday, will reduce the troubled division’s staff of 9,000 by more than 10%, and could trim annual costs by £100 million ($142 million) by 2005, analysts estimate.
EMI topper Alain Levy has been engaged in an ongoing revamp of the company, which is trying to improve its position in the U.S. market, where it ranks dead last among the five majors. Diskery has issued two profit warnings in the past six months.
EMI garnered just 10.5% of the market for new releases in 2001, according to SoundScan data. Its two main U.S. imprints, Capitol and Virgin, had 19 records on the top 200 list for all of 2001, compared with 33 for Interscope Geffen A&M and Island Def Jam, the two flagships of industry leader Universal Music Group.
Also believed to be on the agenda for next week’s restructuring is the sale of EMI’s 43% stake in music retailer HMV.
HMV is expected to announce it is going public in the near future; that IPO could value EMI’s stake in the neighborhood of $550 million. The disposal would help reduce the company’s $1.56 billion debt.
Levy and his deputy, North America chief David Munns, have been on a tear since taking over the music operations last fall, shaking up the executive suite and shuffling the artist roster.
The pair first made headlines by paying diva Mariah Carey $28 million to walk away from an $80 million contract with EMI unit Virgin Records. Pact, signed by Levy’s predecessor Ken Berry, had seen only one lackluster record delivered.
Levy and Munns later sacked and replaced most of Virgin’s top management in the U.S. and announced that the label will move from Beverly Hills to New York by the end of the year. Scores of Virgin’s U.S. employees are expected to be left behind on the West Coast.
EMI shares moved up 3.75% to $5.03 on the U.K. exchange. Since Levy took the reins, the stock has clawed its way up from a low of $2.95 last October, as investors expressed optimism that the French exec, credited with revitalizing Polygram in the ’90s, can turn EMI around.
(Justin Oppelaar in New York contributed to this report.)