WHEN YOUNGER FAMILY members criticize a private company their family owns, they're often referred to as "loose cannons."
But when family members raise questions about a public company their family controls, they're known as "a shareholders' dream." And that's sort of where Bill Cox III currently resides in the world of Dow Jones & Co.
Since leaving the company as a managing director of Dow Jones Global Indexes last February after 18 years to work at Interactive News Network, the 41-year-old Cox remains vocal about what he perceives as a company that missed the boat and is trying to play catch up in the competitive media world.
With news accounts recently reporting that the company's Dow Jones Markets, the financial information unit formerly called Telerate, and European Business News units may be up for sale (see sidebar), there is no doubt investors think change at Dow Jones is in the air.
Going back to last year, as the stock price languished as the bull market continued to roar, Cox, his cousin Elisabeth Goth and other heirs--along with outside investors--started to question publicly management. Critics urged Dow Jones to sell the financial information unit because it was underperforming competitors and dragging the stock price down.
Quickly, the older Bancroft family members who control 70% of Dow Jones voting stock (Cox's father, Bill Jr., is on the Dow Jones board) realized that raising the dividend was not the focus of younger family members--increasing shareholder value was. And more news was about to come.
In January 1997, Dow Jones' CEO Peter Kann responded by announcing the company would be pumping $650 million into the sluggish Dow Jones Markets division, sending the stock down four points in heavy trading.
Three months later, an angry April shareholders meeting made business front-page news, reflecting shareholders' frustration with management and its inability to raise the stock price.
The media, of which Dow Jones' crown jewel-- the Wall Street Journal--is an integral part, has been equally hard on the Bancroft family.
For example, a New Yorker magazine article highlighted a staggering statistic--the total cash common dividend from 1990 through 1995 rose nearly 400%, while earnings reinvested into Dow Jones businesses fell almost 130%.
In interviews over the past few months, Bill Cox III discussed his views as an insider and former employee on a number of topics, such as Telerate, the stock's performance, CEO Peter Kann, and why he chose to speak out in the first place.
Investors' anger over the company's $650 million investment in an attempt to revitalize Dow Jones Markets, headed by Ken Burenga, sent shareholders into a frenzy.
Powerful hedge fund investors such as James Cramer and Michael Price, who have in the past turned up the heat on other big companies they own stock in, could not understand the logic behind such an expensive move.
Investors knew that if past management decisions couldn't move the stock up, spending even more money certainly wouldn't win over Wall Street, which responded by sending the stock down a few points.
Cox, of course, was not surprised by the reaction. Throwing tons of cash into a weak division cannot buy back years of product development and market share long since lost to Bloomberg and Reuters.
"Telerate had a great franchise for a period of tune" said Cox. "But what happened? Bloomberg came in and exploited the niche that Telerate didn't think existed." He said Reuters and Dow Jones had roughly the same market capitalization of around $3 billion a decade ago. Today, Reuters' market cap is around $20 billion, while Dow Jones remains relatively unchanged, he pointed out.
With research and development problems and unexpected market conditions sometimes hiding in the wings, management estimates of costs to fix problems often turn out to be low. …