Schwab Top Suitor for CyBerCorp Union
Texas broker specializes in hyperactive stock traders
Sam Zuckerman, Chronicle Staff Writer Friday, January 21, 2000
Charles Schwab Corp. has emerged as the most likely buyer of CyBerCorp.com, an Austin, Texas, online broker that does business exclusively with hyperactive stock traders, according to people familiar with the situation.
While CyBerCorp is talking with several other suitors, Schwab, the nation's largest online and discount broker, appears to be the most motivated to pay the $100 million or more the firm is demanding, the people said.
CyBerCorp founder and Chief Executive Officer Philip Berber wouldn't name names but said he is talking with a major online broker, two traditional Wall Street firms and a company that operates an electronic stock trading system.
``We have been engaged in material discussions,' Berber said. ``No announcement is imminent.'
People familiar with the situation said that while Schwab has the inside track, other potential buyers are Lehman Brothers, Merrill Lynch and Instinet Corp., operator of the largest after-hours stock trading system. Merrill couldn't be reached. Schwab and the other companies declined to comment.
For San Francisco's Schwab, which traditionally has courted long-term investors, buying a firm whose clients are full-time speculators who typically buy and sell several stocks in a single day would be a sharp departure. Indeed, Schwab officials have declared that frenetic ``day traders' are not the kinds of customers they seek.
CyBerCorp customers are nothing if not frenetic. The firm's 2,500 clients carry out a staggering 20,000 trades per day, almost 10 trades per day each, making the 4-year-old firm the 10th-biggest online broker. By comparison, Schwab's 3.3 million online customers seem almost somnolent, executing 234,000 trades per day -- which works out to an average of about 2 trades per month each.
CyBerCorp's business is mushrooming, with revenue nearly quintupling to $24 million in 1999.
What Schwab apparently wants is not so much CyBerCorp's itchy-fingered clients as its technology. Analysts said the firm owns the industry's most advanced software for locating the best available stock prices from among all market participants, who may be operating from a dozen or more separate computer trading systems.
``It's difficult to find out where the best possible pricing is,' said Deutsche Banc Alex. Brown analyst Gary Craft. CyBerCorp's ``technology is pretty unique.'
Berber, a 41-year-old, Irish-born entrepreneur who moved to the United States in 1991, said CyBerCorp's software uses hunt- and-seek technology. ``We can find the best bid and offer on Nasdaq in a nanosecond,' he said.
Controlling such technology is a big competitive advantage in attracting not only hyperactive day traders, but also moderately active traders who, above all, are interested in buying and selling securities at the best prices.
Such customers, who may trade once or twice per week or more, are a top-priority market for Schwab. It offers them a variety of special services and Velocity, its sophisticated trading system for active investors.
``We've always had a commitment to those clients,' said Susanne Lyons, Schwab's chief of retail client services. ``We ask ourselves what are the newest technologies we need to make part of our offer.'
Trading software originally aimed at hyperactive traders, such as streaming news and data, ``can become more mainstream,' she noted.
Schwab insiders said the loss of such moderately active clients to cheaper online brokers is a major headache. In an effort to keep active traders from jumping ship, Schwab plans to offer volume discounts from its $29.95 online commission, they said.
|
