Reuters Cancels Instinet.Com Plan, Plans Partnerships
London, Dec. 20 (Bloomberg) -- Reuters Group Plc is scrapping
plans to start an online brokerage for individuals, as U.S.
markets slump and trading volume declines.
The decision to cancel plans for Instinet.com comes after the
Reuters unit postponed plans for the Internet trading service
because of trouble with the technology. Instinet plans to partner
with other brokerage and securities firms to offer online trading
to individuals.
The world's biggest financial information provider cited
``lower levels of trading activity, slowing rate of new customer
growth, and substantial declines in the value of online brokerage
businesses,'' as reasons for its decision.
The securities business is slowing down as U.S. markets
tumble. Morgan Stanley Dean Witter & Co. and Goldman Sachs Group
Inc. yesterday said their fourth-quarter profit fell. Charles
Schwab Corp., the No. 1 online brokerage, last week said the
market's decline may make it ``tough'' for the firm to meet
analysts' forecasts.
The U.S. listing of Reuters fell $3.88 to $104.13. The shares
fell 83, or 6.6 percent, to 1185 in London.
Partners
London-based Reuters said in February it would offer
Instinet, as well as its news and information services, through
the Internet to increase its potential base of clients to an
estimated 65 million from 1.1 million worldwide. The company first
planned to introduce the service last May.
``Key elements of the service will be combined with existing
functionality to address the retail market indirectly via the
brands of other financial services and brokerage firms which wish
to utilize Instinet's execution and clearing services,'' the
company said in an e-mailed press release.
``They're avoiding the additional business risk and financial
risk associated with the retail customers and not exposing
themselves to a skill set (dealing with small investors) they
haven't previously had'' said Simon Baker, an analyst at SG
Securities in London who rates Reuters shares ``buy.''
``They're keeping at what they do best, and that is dealing with businesses
and offering value-added systems for those companies.''
In October, Reuters said it plans to sell shares in Instinet
to raise funds and create stock for acquisitions. The company
didn't immediately return calls seeking comment.
``Looking at the value of e-brokers, I would say that this
adds value for the planned IPO,'' said Amy Butte, an analyst for
Bear Stearns & Co. in New York. Since their high, online brokers'
shares have plunged. Schwab's fallen 19 percent since their April
11, 1999 high. E*Trade, the No. 2 online broker, has fallen 68
percent in the same time.
Bloomberg LP, the parent of Bloomberg News, competes with
Reuters in providing news, information, and trading systems to the
financial community.
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