Vivendi Universal: In a Strategic Flux

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Themes: Corporate Restructuring
Period : 1996 - 2003
Organization : Vivendi Universal
Pub Date : 2003
Countries : France
Industry : Media & Entertainment

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Case Code : BSTR054
Case Length : 17 Pages
Price: Rs. 500;

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"I tried to do too much too quickly."

- Jean Marie Messier, Former Chairman Vivendi Group, The Guardian, July 3, 2002.

France's Biggest Ever Corporate Loss

On March 6th 2003, Vivendi Universal (VU), the leading French media conglomerate, reported a loss of € 23.3 billion¹ for the financial year 2002. VU, one of France's globally renowned companies, was involved in diversified businesses such as media, entertainment, Internet services, water treatment and telecommunications. The loss reported by the company was reportedly the biggest annual corporate loss posted in France's corporate history and surpassed the € 20.7 billion loss posted by France Telecom just a day before.

Company observers opined that VU's problems were mainly caused by the spending spree of former CEO, Jean Marie Messier (Messier). Messier had dreamt of making VU one of the leading media companies in the world, but his business moves in that direction had failed and saddled the company in huge debts. He had reportedly spent € 100 billion in 2000 and 2001 to acquire various businesses including Universal Studios, in an attempt to build a mega Franco-American business empire. VU's efforts to build a rival to AOL Time Warner (leading US-based media conglomerate) and Rupert Murdoch's News Corporation were closely tracked by leading business magazines such as Time and Fortune.

However, the company's 'unmindful' acquisitions almost led it towards bankruptcy by 2002. The company even faced investigations by French and US authorities, earning it the dubious distinction of being the European equivalent of the corporate scandal wave rocking the US since the late 1990s.

Subsequently, in early 2002, Messier was asked to resign by the VU board. In June 2002 he offered his resignation. Analysts felt that Messier's departure from the company would mark the end of VU's quest to keep on expanding its sprawling music, film, telecoms, internet and pay TV empire. As the company began putting in place initiatives to set things right, the story of its diversification troubles and financial problems began to be frequently talked of in the global media.

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1] April 2003 exchange rate: $ 1.08569 = 1 €.