Old guard bounces Bertelsmann CEO

Privately-owned Bertelsmann, home to music group BMG Entertainment and publisher Random House, said it was replacing Middelhoff with Gunter Thielen--a long-serving Bertelsmann executive seen as a safe pair of hands.

Highflier Middelhoff had long battled with Bertelsmann's traditional old guard as he went on a crusade to modernize the secretive newspaper and book publisher, and build an empire to challenge the likes of AOL Time Warner and Disney.

His surprise exit immediately sparked rumors that the 49-year-old German might become the new chief executive of Deutsche Telekom after the ouster of Ron Sommer earlier this month.

But some sources close to the company said it was too soon to say what Middelhoff would do next and a representative for Telekom declined to comment, saying, "We will not get involved in speculation."

Bertelsmann's conservatively minded shareholders had grown increasingly concerned about Middelhoff's adventurous nature and grand plans for the Internet, as the media industry tried to grapple with tumbling advertising revenue.

Middelhoff's departure comes after the ouster of two other high-profile media chiefs this month--Vivendi Universal Chief Executive Jean-Marie Messier and AOL Time Warner COO Robert Pittman.

"The reasons for the departure were differences in views between the chief executive and the supervisory board over the future strategy of Bertelsmann, and over cooperation between the supervisory board and management," Bertelsmann said in a statement.

Taking the helm of the German giant four years ago, Middelhoff engaged in a frenzy of deals to create the world's fifth biggest media group, which he planned to take public.

But the company, based in the isolated German town of Gutersloh since it was founded in 1835 as a publisher of hymn books, remained highly conservative at heart.

Bertelsmann Chief Financial Officer Siegfried Luther--often viewed as Middelhoff's right hand--also was appointed deputy CEO in Sunday's reshuffle.

The company said the new management team "stood for continuity in the further global development of the company," but it was not immediately clear what the change would mean for the group's plans for a stock market flotation.

The drive to list Bertelsmann had been a key part of Middelhoff's long-term strategic vision, but it took some effort to win over Rheinhard Mohn, the 80-year-old philanthropist who essentially controls the company as head of the main shareholder, the Bertelsmann Foundation.

Last year, Bertelsmann opened the way for a flotation by swapping 25 percent of its shares with Belgian investment house Groupe Bruxelles Lambert.

Groupe Bruxelles has the right to sell the stake in a stock market listing by the middle of the decade, a move seen as a stepping stone to the market for Bertelsmann.

With shares in listed media companies worldwide slumping under the impact of market uncertainty and flagging advertising revenue, no move is expected at the moment, however.

While Bertelsmann has been hit hard by the advertising slump--especially its pan-European broadcaster RTL Group--analysts had noted that it was difficult to ascertain how bad things really were at the German group.

Bertelsmann's supervisory board's chief Gerd Schulte-Hillen had been particularly concerned about Middelhoff's grand plans and convinced the group's controlling shareholders, the Mohn family, that they needed a safer leader at the helm.

Middelhoff's replacement, 60-year-old Thielen, is seen as just that, having served with Bertelsmann for more than 20 years. Until now he was running the group's Arvato division.

Middelhoff's name has already been mentioned among possible candidates to replace former Telekom chief Sommer, who was forced out 10 days ago after being blamed for a disastrous fall in the company's share price.

Telekom appointed supervisory board member Helmut Sihler as interim CEO, and gave him the task of finding a permanent replacement for Sommer by the end of the year.