Rappaport Takes The Hot Seat In Telerate Reshuffle

Following the completion of its takeover of Telerate Systems Inc., Dow Jones & Co. has begun consolidating some of Telerate's operations with its own in an effort to reap economies. The move has resulted in a reshuffle of responsibilities at Telerate that places executive vice president Steven N. Rappaport in charge of what Telerate calls trading room systems, including The Trading Service, its automated foreign exchange dealing system.

Summer in New York is never much fun, but Rappaport's could be hotter than most. Dow Jones, in announcing its first-quarter results, said expenses associated with TTS were a prime factor in the 31 percent drop in first-quarter net income before extraordinary items. Dow Jones has disputed the value of TTS. During talks to acquire Telerate, the company said it expected TTS revenue growth in 1990 of only 12 percent, compared with Telerate's estimates of closer to 20 percent growth (MTR, Oct. 30, 1989).

Also falling under Rappaport's new umbrella is FX Development Group, the systems integrator Telerate acquired last summer (MTR, July 10, 1989). Rappaport will also take responsibility for Telerate's order-routing systems effort, which is currently undergoing some upheaval while Telerate remains in dispute with Intex Holdings (Bermuda) Ltd. over the future of their Arena joint venture product (Trading Systems Technology, March 12).

Rappaport reports to Telerate senior executive vice president John Jessop, who continues to have overall operating responsibility at Telerate. Both TTS product manager David Barnes and FXD chairman Dennis Rohan will retain their positions, reporting to Rappaport. Jean Francois Bulycz, former president of Conn.-based International Systems & Software Inc., has been appointed as deputy to Rappaport.

According to Rappaport, after Dow Jones completed its acquisition of Telerate, the two companies sought to reap economies from the eradication of duplicated activities. "John Jessop and I recommended that a number of the administrative functions be consolidated within Dow Jones, such as corporate accounting, corporate legal department, purchasing, facilities management and other things along those lines," he says. "In making those recommendations, I was basically eliminating my job, because those were the areas for which I was primarily responsible here at Telerate."

"His role had to be redefined," says Jessop, "and I decided that he was very much equipped to look after transactional services as a division of the company."

The consolidation into Dow Jones of the chiefly administrative functions for which Rappaport had responsibility is at an embryonic stage. "These are early days," says Jessop. "They have been given reporting lines into Dow Jones. Telerate's finance group now reports into Kevin Roche, the chief finance officer of Dow Jones. The legal group reports into Peter Skinner, who's the Dow Jones house counsel. And what plans they have to consolidate the two organizations I can't tell you. We haven't decided yet."

Rappaport says his appointment isn't an indication of dissatisfaction with the way things have been going at TTS and FXD. Rather, he says, it "might be able to bring greater or earlier responses of some of the things they have been doing all along." Rappaport will have global responsibility for trading room systems.

Meanwhile, Dow Jones reported net income slumped 88 percent to $24.9 million for the first quarter from $200 million a year earlier. The year-earlier figure included a $164.1 million gain from the sale of an investment in a cable system operator.

Dow Jones said in a release that a 20 percent rise in operating income in its business publications group was more than offset by a 35 percent drop in operating income in its information services group. That group, which includes Telerate, reported operating income of $35.8 million, down from $54.6 million a year earlier.

While it didn't provide figures for TTS, Dow Jones said the information services group's income drop was attributable mostly to TTS-related expenses. "The comparison between first-quarter information services operating results in 1990 and 1989 is distorted by the inclusion this year of 100 percent of the expenses of developing TTS," it said.

"In the year-ago quarter," it said, "TTS had not yet begun operation; half its development losses were being borne by a 50 percent partner, since bought out, and Telerate's share of those losses was not included in operating results, but was reported as an investment." Telerate bought out AT&T, its partner in TTS, for an undisclosed sum late last year (TST, Dec. 18, 1989).

Revenue for Dow Jones' information services segment, meanwhile, gained nine percent to $184.3 million. Excluding Telerate, the group's revenue climbed 7.9 percent during the period.