The Turnaround of Vivendi Universal


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Case Details:

Case Code : BSTR199
Case Length : 15 Pages
Pages Period : 1998-2005
Organization : Vivendi Universal
Pub Date : 2006
Teaching Note :Not Available
Countries : France
Industry : Media and Telecommunications

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"Vivendi Universal has everything it needs to be optimistic about the future." 1

- Jean-René Fourtou, Chairman of the supervisory board, Vivendi Universal in July 2002.

"Jean-René Fourtou has exhibited extraordinary management and leadership skills, both at Aventis and at Vivendi Universal." 2

- Thomas Niles, President, The United States Council for International Business (USCIB) in July 2004.

Introduction

In 2004, Vivendi Universal (VU), the French media and telecommunications company, recorded a profit of €754 million. VU was in the news back in 2002, when it reported losses to the tune of €23.3 billion for the financial year 2001-2002, the biggest corporate loss recorded in French business history.

Jean Marie Messier (Messier), the then CEO of VU, had dreamt of turning VU into a leading global media company3 and made a number of acquisitions during the years 2000 and 2001. His dream, however, turned into a nightmare when these acquisitions ultimately led to the near bankruptcy of the company. The company was downgraded to 'junk'4 status by many credit rating agencies and analysts too wrote off any possibility of the company's revival. Messier was held responsible for the state of the company and was forced to step down from his position in July 2002. Jean-René Fourtou (Fourtou) joined VU as its CEO in July 2002. Fourtou managed to steer VU out of its losses and to help it regain its financial health by the end of 2004.

Fourtou accomplished this mainly through the disposal of several assets Messier had acquired during his term. VU was also brought back to 'investment' status by Moody's, and Standard & Poor's in 2004. The company's revenues (for the first half of 2005) went up by 7% and it estimated a 37% increase in profits for the full year 2005.

As of 2005, VU consisted of two broad business units: media and telecommunications. The media business consisted of the music business, Universal Music Group (UMG), games business, Vivendi Universal Games (VUG), the French TV and film business - Canal Plus Group (CPG), and a 20% controlling stake in NBC Universal (a TV and film business based in the US). The company's telecommunications business consisted of fixed and mobile telecom operators - Groupe SFR-Cegetel and Maroc Telecom. VU had been taking advantage of the boom in digitized entertainment. The company has been creating synergies between its various business units to enhance its opportunities in the digitized entertainment sector.

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1] "Fourtou moves in to head Vivendi," David Teather, The Guardian, July 4, 2002.

2] "Vivendi Universal Chief Jean-René Fourtou to be Honored for International Leadership," http://www.uscib.org/ index.asp?documentID=2929.

3] Until the early 1990s, VU was one of the leading utility companies in the world. When Messier arrived as the company's CEO he purchased and sold many companies and turned VU into a 'media conglomerate'.

4] Agencies like Standard & Poor's, Moody's, etc., rate companies depending upon their creditworthiness. For example, Standard & Poor's grade AAA represents highest quality debt. Generally, securities having highest probability of default are graded in the 'junk' category.

 

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