Bat­tle lines shift as David aims to bring down Go­liath in the fi­nan­cial data war

The boss of the new com­pany carved out of Thom­son Reuters is happy that data is now at the heart of the land­scape, he tells Tom Rees

The Sunday Telegraph - Money & Business - - Technology Intelligence -

The wall back­ing on to David Craig’s of­fice is like a bat­tlemap cov­ered with his skir­mishes. The boss of Refini­tiv, an 18-day-old fi­nan­cial data com­pany carved out of Thom­son Reuters, has scrib­bled on nearly ev­ery inch of the white­board wall with ideas to grab a greater slice of the global fi­nan­cial data mar­ket, worth nearly $30bn.

Craig says the “com­pet­i­tive land­scape is chang­ing com­pletely” to­wards one of mul­ti­ple play­ers: “The new bat­tle­ground is around data.”

The “B” word barely touches Craig’s lips but Refini­tiv’s ri­valry with Bloomberg looms large. The fi­nan­cial data gi­ant, co-founded by for­mer New York mayor Michael Bloomberg, has a stran­gle­hold on global mar­kets. Bloomberg took a third of the fi­nan­cial mar­ket data and anal­y­sis last year, while Thom­son Reuters’s slice was 22.5pc, ac­cord­ing to data from Bur­ton-tay­lor In­ter­na­tional Con­sult­ing.

Craig is re­draw­ing over out­lines of faded doo­dles ex­plain­ing the com­pany’s two main prod­ucts: Eikon and Elek­tron. The for­mer is the ter­mi­nal, or desk­top prod­uct, that pro­vides users with a pro­gramme to view and an­a­lyse data. The ter­mi­nal al­lows in­vestors to con­sume data through a mind-bog­gling ar­ray of func­tions from track­ing ship­ping car­goes to watch­ing the pound’s fluc­tu­a­tions, and has his­tor­i­cally been Bloomberg’s stronger ter­ri­tory. Mean­while, Refini­tiv has been the mar­ket leader for the lat­ter, which pro­vides fi­nan­cial com­pa­nies with up-to-the-sec­ond fi­nan­cial data to power their own ap­pli­ca­tions from a sin­gle data source.

But Craig be­lieves that the bat­tle­ground is shift­ing to Refini­tiv’s home turf and now he has the au­ton­omy and Wall Street clout to tur­bocharge his at­tack on Bloomberg’s lead­ing po­si­tion. A con­sor­tium led by pri­vate-equity go­liath Black­stone en­gi­neered a $17bn (£13bn) lever­aged buy-out for 55pc of Thom­son Reuters’s Fi­nan­cial and Risk di­vi­sion, the largest deal us­ing junk-rated debt since the fi­nan­cial cri­sis.

Bloomberg’s grip on fi­nan­cial mar­kets is ir­refutable. The hunt for a so-called “Bloomberg killer” is one rid­dled with fail­ure. Many have been touted as a ris­ing chal­lenger to break its dom­i­nance but few have laid a scratch on the data be­he­moth.

Bloomberg’s om­nipres­ence on trad­ing floors came from hav­ing a highly in­no­va­tive prod­uct at the right time. Dereg­u­la­tion in the Eight­ies was cre­at­ing a boom in fi­nan­cial hubs and, cru­cially, stock ex­changes were turn­ing to elec­tronic trad­ing. The first ter­mi­nal in 1982, which even pre­dates the first Ap­ple Mac, con­sisted of a small un­so­phis­ti­cated box that opened up a sea of in­for­ma­tion to in­vestors.

Rather than wait­ing for the daily news­pa­per to land on the doorstep to look up a stock price, an in­vestor could get it in­stantly at their fin­ger­tips. Be­ing the pioneer to tap the elec­tronic revo­lu­tion sweep­ing global fi­nan­cial mar­kets has en­sured its promi­nence ever since. A fully fledged ri­val from Reuters would not be launched un­til 1999. About 325,000 ter­mi­nals are used to­day and they have made its boss, Michael Bloomberg, the 11th rich­est man in the world with a net worth of $52bn.

But now Bloomberg’s rep­u­ta­tion as the in­fal­li­ble data gi­ant is be­gin­ning to come un­der threat. Mount­ing dis­con­tent over pric­ing has stoked de­mand for chal­lengers to its ter­mi­nal. It is ex­pen­sive but has be­come deeply in­grained in global fi­nan­cial mar­kets.

Al­though list prices are not pro­vided by the firms, Refini­tiv is con­sid­ered the mid-range prod­uct, while fast-grow­ing com­peti­tor Fact­set is the low-cost op­tion. Doug Arthur, an an­a­lyst at Hu­ber Re­search Part­ners, ex­plains Refini­tiv has been “lost in the mid­dle there some­where”.

“To get mar­ket share, they have had to com­pete on price,” he says.

Bloomberg has shown it is not im­mune to com­pet­i­tive pres­sures. The com­pany’s In­stant Bloomberg (IB) func­tion is a sim­ple mes­sag­ing ser­vice that has be­come vi­tal in mar­kets be­cause of its enor­mous scale.

“Sales peo­ple seem to be very re­liant on it [Bloomberg ter­mi­nal] be­cause of its abil­ity to con­nect them with clients,” says Arthur. “An aw­ful lot of clients just com­mu­ni­cate all day long on Bloomberg. I don’t think they can func­tion with­out it.”

Sym­phony, a chat sys­tem de­vel­oped by Gold­man Sachs that at­tracted in­vest­ment from a glitzy list of Wall Street heavy­weights, was launched in 2015 as a ri­val to wean banks off the ex­pen­sive ter­mi­nals. Bloomberg re­sponded by un­bundling the chat ser­vice from the ter­mi­nal at a cut price.

Alas­tair Reid, an an­a­lyst at Beren­berg, be­lieves pres­sures could also spread into Elek­tron, Refini­tiv’s data-feeds busi­ness. “Banks want to save money and a lot of data feeds can now be de­liv­ered, rather than through phys­i­cal com­puter hard­ware, through things like the cloud.

“That is pro­vid­ing an op­por­tu­nity for Fact­set and Bloomberg on a prod­uct that Thom­son Reuters has been very much the mar­ket leader.”

Refini­tiv has had a rocky start to life on its own two feet, los­ing a ma­jor con­tract from Mer­rill Lynch in Au­gust to Fact­set. Craig says be­ing carved out of Reuters and be­com­ing a stand-alone com­pany gives it a new “fo­cus”, one not shared with the de­mands of a news­room. The orange of the Thom­son Reuters brand is splashed across the car­pets of Refini­tiv’s Ca­nary Wharf of­fice. But it is at­tempt­ing to dis­tance it­self from the for­mer owner, which has the re­main­ing 45pc stake.

Refini­tiv has also shaken off the quar­terly grind. Mov­ing from a pub­licly traded firm to a pri­vate one has al­le­vi­ated the im­me­di­ate pres­sures share­hold­ers place on man­age­ment.

Craig says: “You get to do in­vest­ment cases that take two or three years to pay off.”

That’s not to say that Refini­tiv will be a van­ity project for Black­stone with­out the long-term goal of cre­at­ing value. The pri­vate-equity gi­ant plans to de­liver $650m in cost sav­ings while kick-start­ing stag­nant rev­enue growth.

Reid wor­ries that af­ter years of be­ing squeezed dur­ing re­struc­tur­ing un­der Thom­son Reuters, it has

‘An aw­ful lot of clients just com­mu­ni­cate all day long on Bloomberg. I don’t think they can func­tion with­out it’

‘Can they get rev­enues grow­ing? To use a US foot­ball term, it’s three yards and a cloud of dust. I don’t think there’s any magic solution’

‘For­get about chal­leng­ing Bloomberg. Can Black­stone open doors that Thom­son Reuters couldn’t do on its own?’

For­mer New York mayor Michael Bloomberg’s com­pany has been at the top of the fi­nan­cial data in­dus­try since tap­ping the elec­tronic revo­lu­tion in the Eight­ies, but ri­vals could be gain­ing ground on the pre­vi­ously unas­sail­able ti­tan

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.