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Bertelsmann Continues to Tinker with E-Commerce Activities

In the run-up to its stock market listing, the media giant continues to tighten its structure and banish cash-burning online ventures from its balance sheet wherever possible.


The restructuring of Bertelsmann AG's loss-making Internet business continues

The restructuring of Bertelsmann AG's loss-making Internet business continues. The group announced Wednesday that Bertelsmann E-Commerce Group (BECG), founded as recently as spring 2000, will be dissolved by the end of this year and integrated into the US business of BECG parent Bertelsmann Direct Group.

Bertelsmann Direct Group, which generates sales of around 3.8 billion euros, pools all operations that have a direct link to the end customer, such as book clubs. The group's move reflects the ever tougher conditions in the e-commerce industry.

BECG's stake in online book retailer Barnesandnoble.com will in future be managed directly by Bertelsmann Direct Group.

Its online music retail activities were already integrated into the Bemusic division in summer this year. It now faces rigorous restructuring by US manager Stuart Goldfarb, who has already applied his skills to Bertelsmann's online book retailer BOL.

Bertelsmann chief Thomas Middelhoff was under pressure to act. He achieved spectacular successes in selling share packages in deals totalling billions to AOL, AOL Europe and network operator Mediaways. But since then, matters have become increasingly worse in the group's online business.

Losses in the Internet division totaled around 888 million euros in the 2000/01 business year, and some 499 million euros of these were incurred by Bertelsmann Direct Group alone. In the run-up to its stock market listing, Bertelsmann is tightening its structure to banish its cash-burning online ventures from its balance sheet.

The aim is to move as many Web activities as possible back into the group's core businesses as part of a multi-channel distribution strategy. One example is the recent integration of the multimedia unit of publishing house Gruner & Jahr into its magazine division, "Zeitschriften Deutschland".

Another is the transfer of the loss-making stake in Pixelpark AG from Bertelsmann Direct Group to the financially strong Bertelsmann Arvato with effect from 1 January 2002. Bertelsmann will present rump-year results on 31 December 2001 before it switches to calendar-year reporting.