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Bertelsmann Expects Steady Course

July 30, 2002

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FRANKFURT, Germany (AP) _ A member of the family that controls Bertelsmann, the German media conglomerate, said he doesn’t expect a fundamental change of strategy after the sudden departure of chief executive Thomas Middelhoff, who was known for promoting deals with Internet ventures such as Napster.

Christoph Mohn, son of company patriarch Reinhard Mohn, said in a newspaper interview released Tuesday that new CEO Dieter Thielen should not be written off as an old-economy executive even though he comes from a more traditional division of Bertelsmann, the printing and media-services group Arvato.

``Thielen is being underestimated,″ Mohn was quoted as saying by the Tagesspiegel daily. Mohn, who heads the Internet portal and Bertelsmann business partner Lycos Europe, said Thielen ``has built a highly modern and very profitable service branch from the traditional printing business″

Thielen, 59, was chosen Sunday by the board of directors to take over from Middelhoff, who left after a dispute over strategy with the Mohn family. Although Arvato reflects the 167-year-old company’s origins as a printer of religious books, it also owns the e-commerce firm Pixelpark and produces CD-ROMs.

German news reports say the Mohns, who control three-quarters of the company’s stock, resisted Middelhoff’s plans to have them add some of their shares to an expected public sale of a 25 percent stake held by Belgium’s Group Lambert Bruxelles in 2005.

Middelhoff, 49, had led Bertelsmann into an array of Internet-connected ventures. He pumped funds into Napster and invested in e-retailing projects such as Barnes&Noble.com and BOL.com.

But his aggressive dealmaking, insistence on going public and plans to sell several traditional divisions such as scientific publishing reportedly ruffled feathers at the 167-year-old firm, whose businesses include U.S. book giant Random House, European broadcaster RTL, and music company BMG.

Napster, whose assets Bertelsmann agreed to buy in bankruptcy proceedings, is off-line while Bertelsmann seeks a way to revive it as a subscription service. But analysts say it is being overtaken by competing music-distribution models, and it faces lawsuits from BMG’s rivals who say it pirated their music.

German news media have speculated that with Middelhoff’s departure, the company’s involvement with Napster may be up for review. Company officials declined comment Tuesday on the direction Thielen might take.

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