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Major shift at Reuters

Reuters NewMedia, launched less than three years ago to move the international news service online, is undergoing a major restructuring that will result in the subsidiary losing its autonomy.

Reuters NewMedia, launched less than three years ago to move the international news service online, is undergoing a major restructuring that will result in the subsidiary losing its autonomy, CNET has learned.

Under the reorganization, oversight of NewMedia's operations is being transferred to Reuters Holdings, its London-based parent corporation, a source said. The move coincides with the departure of the subsidiary's president, Buford Smith, who resigned Monday.

Reuters NewMedia develops new applications for the company's information and transaction services in various online and business markets. Among its services are hourly news, photos, videos, and information delivered to a variety of online services and Internet publishers.

"The company felt when it formed NewMedia that it wanted to be an active participant in online services," the source said. "But this move will take away its autonomy and stifle the entreprenuerial spirit. The company is moving in the wrong direction."

Bob Crooke, a Reuters spokesman, declined comment about Smith's departure and the realignment of NewMedia. But a source said control of the subsidiary was transferred after company officials had expressed a desire to incorporate NewMedia's services into other existing company products.

Sales of Reuters information to Web sites is starting to surpass sales of the information to newspapers this year, the source said. Also, TV advertising spots bought and sold over NewMedia's network have done well, with the company expecting to see $2 billion in business move through its network by the end of the year. That's an increase from $60 million a few years ago, a source said. Reuters NewMedia receives a small percentage of the revenues from volume of business running through its network.

Analysts said it is too early to determine whether the changes will have a negative affect on the company. "NewMedia has been seen as a small growing business for Reuters," said David Hochstim, an analyst with Bear Stearns in New York.