Bertelsmann picks its new No. 1

Ostrowski will focus on cutting debt, boosting profit

German media giant Bertelsmann has named Hartmut Ostrowski, head of its media services division Arvato, as the successor to chairman and CEO Gunter Thielen.

Ostrowski, who beat Ewald Walgenbach of Bertelsmann's DirectGroup division for the top job, will take over from Thielen on Jan. 1. Thielen will be chairman of Bertelsmann's supervisory board, replacing longtime chairman Dieter Vogel, who is resigning. Arvato chief operating officer Rolf Buch will succeed Ostrowski as head of that division.

"We welcome Hartmut Ostrowski's appointment as the chairman and CEO as part of the changes in Bertelsmann's top leadership," Bertelsmann majority shareholders Liz and Reinhard Mohn said. "Ostrowski stands for excellence in entrepreneurship and great business success, as his managerial style of leadership through partnership embodies Bertelsmann's proven corporate culture."

Bertelsmann's supervisory board picked Ostrowski late Thursday.

Taking over the reins at Bertelsmann, Ostrowski's main job will be to cut debt while squeezing greater growth and profit out of the group's largely independent business divisions.

Bertelsmann — which controls Europe's No. 1 broadcaster, RTL Group, along with music label BMG and book publisher Random House — spent much of 2006 dealing with internal problems.

The company piled on debt to finance its €4.5 billion ($5.8 billion) buyback of the 25.1% stake in Bertelsmann held by Groupe Bruxelles Lambert. The deal more than doubled Bertelsmann's economic debt to €8.9 billion ($11.4 billion) from €3.9 billion, a level company chief financial officer Thomas Rabe said represents "the upper limit" Bertelsmann is willing to tolerate.

Bertelsmann already has sold its BMG Music Publishing division to Vivendi for $2.1 billion to help trim debt, and further selloffs might be in store.

While the company is well-placed to take advantage of a rebound in advertising sales in Europe — RTL last year posted record results thanks to strong TV ad sales — the Internet remains a problem area for the German giant.

When Thielen took over from Internet-friendly CEO Thomas Middelhoff in 2002, it was after the Internet bubble had burst. Thielen focused on bread-and-butter issues of efficiency and core markets, leaving other media companies to "experiment" with such ventures as MySpace and YouTube.

Now, Bertelsmann arguably is the worst-positioned of the big-media conglomerates to take advantage of the shift in eyeballs — and ad dollars — to the online space.

Bertelsmann does not have a corporatewide Internet strategy, as separate divisions operate largely independent of the central offices in Gutersloh. Chief financial officer Rabe has suggested a greater degree of centralization — so far without much success.
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