IIP-Bloomberg Financial Services Terminal by Bloomberg Inc
T.A. Dyakala, Z.E. Sitole
Reuters Holdings PLC and Bloomberg LP ruled for years, the $7.5 billion business of delivering instant financial numbers and news. That changed on March 17, when Bridge Information systems Inc, long regarded as an also-ran, burst on to the seen by paying $150 million for Telerate Dow Jones and Company's money-losing-bond pricing arm.
The two competitors i.e Reuters Holdings PLC, by for the worldwide leader and Bloomberg LP, fought for the same users, but wound up side by side on many desks. Reuters specialized in foreign exchange and European news, while Bloomberg offered sophisticated financial analytics. That changed on 17 March 1998, when Bridge Information Systems Inc, long regarded as an also-ran, burst on to the scene by paying the $510 million for Telerate, Dow Jones and Companies's money-losing bond-pricing arm. Reuters remain the leader by far, with 386,000 desktops. But Briedge with 169,000 users will eclipse Bloomberg, with 92.000 as number two provider. Only two major providers are likely to wind up delivering the real-time data and news that grease the financial markets, as traders, financial analysts-and a growing contingent of corporate execs...cut information clutter. "Desktop real estate is more precious than ever."
Bloomberg, who has made billion's feedings the demand, will have to fight harder than ever. Bridge was a $130 million laggard until 1995, when it was purchased by Welsh, Carson, Anderson & Stowe, a powerful investment bank with a history of building businesses through acquisitions and spinning them off. Absorbing Telerate won't be easy. Because of customer defection to more comprehensive services, Telerate lost $70 million to $100 million last year, say insiders. Its technology and culture differ vastly from those of Bridge, which lost some desktops after previous mergers. We had to hold the hands of our customers. Patrick Welsh, a partner in the investment firm that owns half of Bridge said that, they gave their customers incentives to stick with them, they achieved something much larger.
Since buying Bridge, Welsh's firm has poured tens of millions of dollars into its database, technology, delivery systems, and management. It is also tapping customers that have never used real-time data. Bridge collaborated with the New York Stock exchange to put terminals on the desks of 6000 chief execs and chief financial officers to get instant trading information. And Bridge is penetrating newsrooms, where Bloomberg has gained priceless publicity for swopping machines for bylines.
Bridge, though, he has a serious vulnerability: The key contract that gives it the leading government-bond pricing is in jeopardy. Cantor Fitzgerald LP, the biggest seller of treasury bonds, supplies exclusive data to Telerate's 94.000 customers at $30 a head per month. When the contract shifts from Dow Jones to Bridge, Cantor wants payment for the 75.000 users Bridge already had. Bridge argues that the contract is limited to the Telerate customers, leaving the difference at $27 million annually.
Value added and Risk Involved
The contract, which expires in 2006, is crucial for Telerate. Virtually all bond prices are benchmarked against the prices of T-bills and Cantor is the biggest seller. In an internal poll last year, customers said they would dump Telerate if it weren't for the Cantor data, according to an insider. If Cantor prevails, Bridge would have to hike its current rate by 45 dollars a month-a 50% jump for bottom tier costomers-to turn a profit, say sources close to the deal.
That would kill its edge as the lowest-cost provider of real time data. Right now, Bridge sells its service a la carte, providing bare-bones equities data for 150 dollars per desktop, and up to 750 dollars for its entire menu. It also offers an "open" system that lets customers download data to their own PCs and merge them with outside data and programs. Our rallying cry is, we give our clients more choices, better prices, and more open systems, Bridge CEO Thomas Wendel says.
Reuters also has an open system and charges 800 to 1,200 dollars depending on the data desired.
Bloomberg is betting on its uniqueness. Not everybody needs what we have, says Bloomberg, an ex-Salomon Brothers Inc. partner. But those that do can't get it anywhere else. Which is why his company may continue to thrive despite its costly closed platform and fixed price. Bloomberg charges a flat 1,200 dollar a month per terminal and uses dedicated boxes and software that prevent users from mixing Bloomberg data with outside programs.
It stopped making the boxes two years ago and has rolled out newfangled machines that double as PCs. It also has created online access.
They gave their customers some incentives as they achieve something much larger.
ANALYSIS
Bloomberg is competing with Reuters selling financial services to customers. It seems as if they fought for the same users. Bloomberg offered sophisticated financial analytics, while Reuters specialized in foreign exchange and European news. The fact that Bloomberg charges a flat rate of 1,200 dollars a month makes him more attractive to customers, take for instance the user BT's Shah who raves about getting stock quotes on the fly but still cannot live without Bloomberg. Users are still limited to Bloomberg applications, but they have more convenience in the battle for desktop real estate.
On the other hand Reuters has an open system and charges 800 to 1,200 dollars, depending on the data desired. Reuters is making efforts to provide the type of analytics that make Bloomberg so valuable, which means that Bloomberg's services are the top.
References
(a) Dow Jones&Co Inc Ticker:DJ Duns:00-131-6702
Bloomberg LP
(b) Reuters Information Service Inc
Reuters Holdings PLC
Bloomberg LP
(c) InVest Financial Services
(d) Bloomberg Business News
(e) Standard & Poors Corp Duns:00-136-7697
I.I.P. BLOOMBERG FINANCIAL SERVICES TERMINAL BY BLOOMBERG INC.
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GROUP 20