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"We have strengthened our core businesses and strengthened our portfolio. We reduced losses [in internet operations] and improved cost management, and we are redefining our internet strategy."
——Bertelsmann CEO Gunter Thielen.
BERTIE PROFITS DROP 25%
$2.7 Billion Acquisition of Zomba Weighs on Bottom Line

Bertelsmann said Tuesday that net profits fell 25% in 2002 from the year before, as charges from the acquisition of Zomba Music affected the bottom line.

The German media giant said net profits fell to €928 million ($1.03 billion) from €1.23 million the year before.

The company also said a sharp increase in underlying profits as strong contributions and cost-cutting by its broadcasting, publishing and music businesses offset lower sales and weak advertising. The privately-owned German company said earnings rose to €936 million ($997.7 million) from €573m, before amortization, depreciation and one-time charges, on sales down 3.5% at €18.3 billion.

The decline came in part from a €1.3 billion reduction in the value of Zomba Records, bought last year for $2.7 billion, due to the difficult times in the music business as a whole, according to wire reports.

In addition, the group said sales fell to €18.3 billion from €19 billion the year before, with the company attributing the drop primarily to the stronger euro.

Bertelsmann's Random House publisher benefited from a recovery in the U.S. book market, as its earnings grew to €168 million from €33 million, while its BMG music company rode the success of Avril Lavigne and Pink, rebounding to a profit of €125 million compared with a loss of €79 million, the Associated Press reported

RTL Group saw earnings rise to €465 million from €385 million, the group said.

Gunter Thielen, who replaced Thomas Middelhoff as Bertelsmann CEO last year, said it was a credible performance against a difficult advertising market and intense competition in the media industry.

"We have strengthened our core businesses and strengthened our portfolio," he said. "We reduced losses [in internet operations] and improved cost management, and we are redefining our internet strategy."

The company has been retrenching its investments in Internet-only businesses launched under previous Middelhoff, saying now that the Internet is more a way of marketing existing brands. Middelhoff left earlier this year after reportedly clashing with the Mohn family, who control 75% of the shares, over strategy and whether the family would sell some of its stake.

According to the Financial Times, Thielen said last year's improvement was due partly to Middelhoff's strategy. While he declined to comment on the reasons for Middelhoff's departure, the CEO defended the role of Bertelsmann's controlling Mohn family, which controls 75% of the group's shares.

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