The difference between the dot-com boom of the late 1990s and the renewed excitement of the Web 2.0 age is simply this: companies are not talking about future earnings online, they are making money from the internet now. The digital age is not a promise, it has become a profit stream.

Reed Elsevier’s decision to put its education business up for sale is a dramatic expression of this new dynamic. Sir Crispin Davis, the chief executive, has essentially decided to offload a lumpy, low-growth book-publishing business in order to ensure the company can concentrate on higher-margin, internet-based information services.

It has taken some courage for Sir Crispin to put the Harcourt education business on the block. There are other education businesses on the market, put on sale by Thomson and Wolters Kluwer. Reed, no doubt, hopes that a potential buyer has the appetite to put Harcourt and Thomson’s higher education businesses together and pay for the synergies. But the Harcourt education division is valued on Reed’s books at $2.6 billion (£1.33 billion). Sir Crispin’s bankers at UBS have a job on their hands to elicit a buyer who will pay that — or more.

More importantly, Sir Crispin is selling a business which he himself bought. It was his decision to purchase Harcourt for $4.5 billion in 2001. Nearly half of Harcourt was healthcare publishing, which has doubled its revenues in the past six years.

BACKGROUND

• Reed Elsevier to quit arms exhibitions

• Cinven eyes Reed assets

• Reed evolves to go with the flow

• Reed Elsevier to sell education arm after poor performance

• Pearson buys Reed text book arm for £425m

Reed sale shows faith in internet

Companies are not talking about future earnings online, they are making money from the internet now, Reed's decision expresses this

Related Internet Links

• Reed Elsevier company information

• Reed Elsevier share price chart

• Reed Elsevier forecast

But the education division — valued at $2.5 billion — has had erratic returns. Reed was part of a European scramble for US education assets at the turn of the century, which were rooted in the misplaced expectation that the American classroom would be transformed by digital technologies. So far, it has not. While other parts of Reed’s businesses have migrated online, only 5 per cent of the US education business is digital. Harcourt may have been his deal, but Sir Crispin has calculated simply that the share price is stronger than pride. And the disposal of the education business will liberate Reed to grow by focusing on scientific, healthcare and legal publishing.

These are media businesses which are not being disintermediated by the internet, but invigorated by it. In 2000, healthcare publishing meant producing books. Three years ago, it meant providing that book content online. Today, it means selling doctors online services which enable them to keep patient records, trawl databases for clinical studies, analyse the efficacy (and side-effects) of pharmaceuticals and then issue the prescription direct to the local pharmacy.

Media companies selling to general consumers may wish that the pace of digital change would slow. Companies like Reed, which for years inhabited the dull, geeky world of niche publishing, are relishing the rapid migration online. Digital information services mean higher margins and consistent growth.

Reed’s decision underlines a fundamental change in professional publishing, an abandonment of the printed word on dead trees and an embrace of a new information services business model. Professional publishing has crossed a threshold, shelving books to embrace bytes: it is offloading the creation of Johannes Gutenberg and placing his faith in the ‘invention’ of Al Gore.

Cool lead from Credit Suisse

Credit Suisse is not the bank it once was. There was a time, when it could be relied upon for a good succession battle, a stream of high level defections, a series of damaging leaks in the press, a poisonous argument in the boardroom and, ultimately, an unceremonious exit for the chief executive.

Yesterday, the bank delivered the kind of drama more befitting a Swiss financial institution: one diligent, low-key executive quietly handed over to another, at a time of his choosing and accompanied by a strong set of results.

Oswald Gröbel is returning to the retirement from which he was plucked in the midst of the John Mack saga just a few years ago. Brady Dougan, a 17-year veteran of Credit Suisse who at present runs the investment banking business out of New York, will take over. Lovers of drama may have been disappointed, but the staff and clients of Credit Suisse have applauded.

Within the Swiss corporate landscape, it is significant that Credit Suisse has chosen an American investment banker who does not speak German and has never lived in Zurich as its next chief executive. Swiss companies have preferred Swiss — or at least continental European — leadership. Credit Suisse might have been excused for shunning American chief executives, given its recent turbulent history. But the Dougan appointment shows that the bank has made a sober choice on merit. It also raises the question of whether other Swiss banks, notably UBS, will look abroad as they prepare for generational change.

The appointment of Mr Dougan also lays to rest the recurrent speculation over the place of CSFB, the investment bank, within the broader group. It will be at the heart of Brady’s bank.

It is time, it seems, to take Mr Gröbel at his word: this is, indeed, “one bank”.

Rates riddle

The puzzle created by yesterday’s official retail sales data is as intriguing as it is, ultimately, unimportant for discerning where interest rates go next.

Attempting to unravel this latest conundrum from the Office for National Statistics proved an enticing game for analysts. Retail surveys had shown buoyant sales last month. Yet the ONS says that January was bleak on the high street. Economists, who can’t resist such Su Doku-style enigmas, went to work and hatched a flurry of theories: seasonal adjustment is being made far harder by changes in consumer spending patterns, discounting means that even quite high spending can translate into much lower sales volumes, and so on.

Well, as Mervyn King likes to say, the truth about Christmas in the high street will probably not be clear until Easter.

Meanwhile, there are two, straightforward bottom lines.

The first is that consumer spending still faces significant and persistent headwinds, from higher taxes, bills, and base rates, and so may well slow.

The second is that none of this is likely to prevent another rate rise, and nor should it. Rapid growth of money and credit has clearly spilled into asset markets, whether for houses or in the financial sector. In turn, the wider inflationary pressures this spells are enough, on their own, to justify another rate rise.

Investors had to be counter-intuitive to make money in the first six years of our healthier, high-tech century. ABN Amro’s Global Investment Returns Yearbook shows returns on the best world sector were 17 times that of the worst. The worst was IT hardware, down 63 per cent after the burst bubble. The best was tobacco, which returned 511 per cent. In the UK, returns on tobacco were 137 times better. Where there’s smoke . . .

james.harding@thetimes.co.uk

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