HOWZAT

Tony Lucki, president and chief executive of Harcourt, last summer announced he was leaving to run Houghton Mifflin, a competitor. That came just months after Derk Haank, head of scientific publishing, left to join one of Reed’s main rivals. Haank had been with the company for 17 years.

Both departures were clearly a blow to the seemingly impregnable Davis.

In addition, there has been unrest in the scientific community about some of Reed’s methods of doing business. In America, the Public Library of Science, a non-profit organisation, launched a drive to make scientific and medical literature more accessible. It has made its first scientific journals freely available online.

And in another move that will irritate Reed, Congressman Martin Sabo is sponsoring a bill that seeks to exclude any government-funded scientific research from having US copyright protection. At present Reed charges leading scientists, economists and academics to have their work published. Analysts believe the proposed change has the potential to disrupt Reed’s highly profitable, science-publishing franchise.

In a further worrying development, two University of California scientists have proposed a boycott of six of Reed’s biology journals, accusing the company of charging exorbitant fees, according to Citigroup analysts.

It does not add up to a crisis for Reed and Davis, but change will be needed for the love affair with the City to continue.

Jeff Meys, media analyst at UBS, said: “The market has shifted to different types of stories. Reed is still a stable deliverer, but 2004 is not the company’s year. Half the business is in America, and in education and business-to-business the market is not good. Education is cyclical and also there is the poor fiscal situation of many states. They are banking on it picking up in 2005.”

So what will Davis do? As he sits at his usual table at London’s Goring Hotel, a stone’s throw away from Victoria station, the fiercely competitive chief executive knows that more critical eyes are now trained on his performance. Action is needed.

Standing still will not suffice, and a deal could be one solution.

One analyst said: “Davis is terribly ambitious and very driven. He had a very aggressive pay structure when he came in and that did not pay out as much as it should have done, mainly because of market conditions.

“There is now another structure in place with the lowest threshold a 6% growth target. So there must be a temptation to hit those targets — 12% would have him hitting the jackpot. He has to do something,” said the analyst.

“That something could be a share buy-back or it could be an acquisition. However, he has always fought shy of adding the fifth leg, so it would take a bit of a change of mind for him to do that, but it is certainly not an impossibility.”