INTERVIEW-E*Tradebent on acquisitions--CFO
Reuters Story - July 15, 1998 19:30
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By Jack Reerink
NEW YORK, July 15 (Reuters) - E*Trade Group Inc. plans to
use part of a recent $400 million capital injection to buy a
competitor or complementary Internet service, the online
broker's chief financial officer Len Purkis said Tuesday.
"It's really a war chest to have the ability to use either
stock or cash for strategic acquisitions," Purkis said in a
telephone interview. "It enables us to look at consolidation
possibilities in the the brokerage business but also at
companies that complement our business."
E*Trade Friday said Japanese software company Softbank
Corp. -- which already owns 31 percent of Internet
search engine Yahoo Inc. and has an interest in
popular Web site GeoCities -- would take a 27.2 percent stake
in the company for $400 million.
"It's a stable investment," Purkis said, adding Softbank
agreed not to sell its stake for two years and not to increase
it for five years.
Purkis declined to identify brokerage acquisition targets
but said the company is actively scouting out possibilities.
"We're always in talks," Purkis said. "It's something that
continues, especially as we put a group together for strategic
development."
Purkis acknowledged, however, most of E*trade's main
competitors are owned by big financial services firms, which
are unlikely to exit the cyberspace brokerage business.
E*Trade's big rivals include Internet subsidiaries of
Charles Schwab Corp , Donaldson Lufkin & Jenrette
, Fidelity Investments, Morgan Stanley Dean Witter
, Toronto-Dominion Bank's Waterhouse Securities,
and independent AmeriTrade Holding Corp. .
E*Trade, which is based in Palo Alto, Calf., also may buy a
service that expands its product offerings, Purkis said. The
recent acquisition of stock plan software provider ShareData
Inc. is an example, Purkis said.
The firm also will use part of the investment's $400
million proceeds for advertising and beefing up its technology
systems, Purkis said. In addition, the Softbank deal is
expected to lead to new marketing alliances with other Internet
companies, he added.
E*Trade, which recently signed a two-year marketing
agreement with America Online Inc. for $25 million, is
negotiating new and expanded deals with Yahoo and other
Internet companies Softbank holds a stake in, Purkis said.
"I'm not sure whether (the deal) will cut our advertising
costs, but it'll allow us ... to do a lot more things in terms
of marketing," Purkis said. E*Trade has not yet reached any
final agreements, he added.
The new agreements could drive more investors to E*Trade's
site and may help the firm achieve its goal of creating a
financial services "portal" or Internet gateway, analysts said
earlier this week.
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