Pearson had been warning for several months that sales and earnings for the Penguin Group would be off in 2004, and final results showed that sales dropped 6.4%, to £786 million ($1.44 billion), while operating profit tumbled 41%, to £54 million ($99 million). Excluding the impact of the weak dollar, sales for the group were flat and earnings fell 24%. Pearson executives are not looking for a significant rebound at Penguin this year and are calling 2005 "a transition year," a forecast that resulted in about 40 layoffs.

The firing of one children's sales rep, David Cudmore, outraged several booksellers from New England, who mounted an e-mail campaign to protest his dismissal. The booksellers said Cudmore is a knowledgeable sales rep and they are concerned that he'll be replaced by a telephone sales rep. Dick Heffernan, Penguin president of sales, said, "We have all intentions of having our field reps absorb that territory." But he didn't rule out the possibility that some accounts may end up with telephone sales. "We look at every single rep's territory all the time to analyze where the business is coming from and what accounts need to be sold in person," Heffernan said.

Other cuts came in editorial and sales, with the latter undergoing some restructuring to accommodate a decline in sales of mass market paperbacks, said Penguin USA CEO David Shanks. Paperbacks account for about one-third of Penguin's sales. Cuts also came in the DK division, where 44 jobs are being eliminated, all but a handful in the U.K. Pearson is taking a £5-million charge to cover costs of the downsizing, which Penguin chairman John Makinson said is being divided between the U.S. and U.K. Shanks said no more layoffs are planned in the U.S.: "We're definitely done."

In addition to a decline in mass market paperback sales, Shanks said, backlist sales "struggled" in 2004, offsetting a year in which Penguin placed 132 titles on the New York Times bestseller lists. Dollar sales at Penguin USA were up slightly in 2004.