Published April 11, 2009

Marked to market

Humans aren't the only ones hurting in the present crisis. Proprietary trading terminals, including some iconic ones from Shenton Way to Wall Street, are getting the chop as well

By TEH SHI NING

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IN the conference rooms of Bloomberg's New York headquarters, red displays track the 'net new installs' of data terminals in the capital city that each room is named after.

And if those numbers had once told of rapid growth, their story now is one of unprecedented upheaval in the global financial industry, as firms fold, lay off thousands, or cut costs. The iconic Bloomberg terminal, found in trading floors and banking offices worldwide, may become one of the most recognised victims of the fallout.

Already, thousands of the ubiquitous black screens may have vanished with the financial crisis' earliest casualties. Lehman Brothers had some 4,000 Bloomberg terminals, Merrill Lynch had 7,000 and Bear Stearns around 1,000, according to a previous BusinessWeek estimate.

Some of these could have survived in operations taken over by other financial groups. But mergers often led to more consolidation which would have felled traders and bankers, and along with them, their Bloomberg terminals.

Bloomberg, privately held, does not release financial data but it is estimated to have 280,000 'installs' worldwide.

'Thomson Reuters and Bloomberg will face differing challenges and changing business focuses in 2009. At Bloomberg, the attention is directed at finding new revenue outside the core terminal business.' Burton-Taylor International Consulting

And although the biggest blows to Bloomberg have been on Wall Street, ripples are being felt across the world. Along Singapore's Shenton Way and Raffles Place, too, there has been anecdotal evidence of zealous cost-cutters zooming in on the data terminals.

At a local bank's research unit, one Bloomberg machine has been laid off, leaving the team of half a dozen analysts to share the one remaining terminal. 'It's okay, since we don't need it constantly for our work like traders do,' shrugged an economist there.

In the near term, the crunch will likely be cushioned by the two-year lease customers sign, as well as the growth the company enjoyed before the crash. Bloomberg's subscriptions grew 15 per cent last year, according to a Forbes report.

But there are signs that many customers may be planning to give up their terminals once the leases end. In another research house here, a piece of paper stuck on the notice board asked staff who are able to share Bloomberg terminals to give up their screens to those whose terminals have expiring contracts.

'Of course, when people try to cut costs, they'll try their best to return terminals. But Bloomberg locks you in with penalties for breaking the contract, so it's not economical,' a senior analyst there told BT. 'So, we share to avoid renewing. It's good to share.'

Bloomberg, of course, won't be alone in the suffering. Overall global spending on financial news and analysis last year was flat. The industry closed 2008 at US$23.01 billion compared to 2007's US$22.99 billion, said data specialist Burton-Taylor International Consulting in a report.

One economist at the Singapore research unit of an international bank, for instance, told BT that his Reuters terminal was disconnected following a periodic resource check. 'They asked, and I told them I could do without it anyway, so they cut it,' he said matter-of-factly.

Thomson Reuters is Bloomberg's major rival in the financial data business. While it has 34 per cent of the global market share, compared to Bloomberg's 24 per cent, it has always been the Bloomberg story that has captivated.

Michael Bloomberg, current mayor of New York city, founded Bloomberg LP in 1981 after he was fired by Salomon Brothers. The company has quirky Manhattan headquarters, a crowded main floor with glass partitions and fish aquariums, and defies hierarchy by printing business cards with no titles. Mostly, though, it's still the black screen with charts and tables in bright colours that sums up Bloomberg.

But now, Thomson Reuters appears to be better positioned to ride out the storm. It reported stellar first quarter financial results, with net profits rising from US$432 million to US$656 million on the back of US$3.4 billion in revenues. Devin Wenig, CEO of its markets division, also told CNBC last week that although revenues from terminals may fall, there are still pockets of growth.

Terminals contribute to about 30 per cent of Thomson Reuter's revenues, while Bloomberg is said to rely on its screens for 85 per cent of its revenues. Also, while customers fork out US$1,500-$1,800 each month for the all-encompassing Bloomberg terminal, Thomson Reuters' customisable packages mean minimal data can be had for just US$25 a month, with more comprehensive suites costing about US$1,000 a month.

Bloomberg did not return calls and e-mails seeking comment, while Thomson Reuters could not provide fresh comment for the story.

Said Burton-Taylor: 'Thomson Reuters and Bloomberg will face differing challenges and changing business focuses in 2009. At Bloomberg, the attention is directed at finding new revenue outside the core terminal business.' The Burton-Taylor report added that for Thomson Reuters, key priorities include risk management and establishing a foothold against rival Dow Jones in the machine readable news market. Its new financial video service for terminal users, to be launched in June, will also 'test the company's ability to both invest and seek overall margin improvement'.