people: relax only temporary problems following is from briefing.com and nationsbankmontgomery tech conference:
E*Trade Group (EGRP)
Presentation by Len Purkis, CFO, extremely well attended, no doubt aided by the news the
E*Trade systems were not working for one hour on Wednesday. Mr. Purkis did acknowledge
the problem, attributed it to a SW change made the night before in the trading system, which
did not scale with usage, causing the system to crash. (Somewhere there is an engineer realizing
the full value of testing at this very moment...)
Nevertheless, most institutional investors seemed willing to brush off the problem, as the
presentation content was very powerful. Highlights:
Now have 676,000 accounts, account growth is 159% CAGR
95% of new accounts are still with them
Major 99 Goal: recruit 1 million new accounts in 12 months. Will spend $150 million on
marketing
Assets up 36% from quarter ago
Total 15.2 billion in assets, Growth rate: 123%, $26 million dollars per day
During market decline, Q3-Q4, assets stayed flat (meaning new money equaled any
decline in asset value, and that accounts stayed put. People didn't close accounts during
market decline)
Revenue last quarter: $88 million, Growth rate: 122%.
Have 535 million in cash, $560 million in working capital
Goals for 99:
Build management team: getting new VPs from GTE, Sprint, VISA, FEDEx, etc.
Build customer base. Account acquisition costs will only get higher over time, now is the
time to do it.
Long range goal: 17MM new accounts by 2002
$150MM Marketing effort will be: Mail 12%, Events: 15%, Radio: 15%, Net: 22%,
Mags: 9%, TV 20%, Papers: 7%
Destination E*Trade now has 500,000 registered users
Reach is greater than Schwab and Ameritrade combined (Media Matrix)
Total page view up 38% to 263 million
E*Offering: New internet investment bank to bring companies public. E*Trade owns
28%, with options to buy 51%. 50% of IPO stock will be routed to E*Trade for direct
sale to customers. (Here is your chance to get in on an IPO) Sandy Robertson (of
Robertson-Stephens) and Walter Cruttendon (of Cruttendon-Roth) are partners.
E*Trade customer profile, did not define the terms, categories determined by account
activity
Dabblers
33%
Builders
24%
Strivers
33%
Power Traders
10%
PowerTrader program now offered for volume traders. 30 Trades/Quarter gives you
extra services, like real-time quotes, 75 Trades/Quarter gives you streaming real-time
quotes, and Level II quotes. Powered by Bridge. Goal is to attract more power traders
Also invested in Archipelago, a new ECN (electronic communication network). ECNs
are extra-NASDAQ trading systems. InstiNet is best known example of existing ECN.
Only 9 ECNs exists. 22% of all NASDAQ trades occur on ECNs. 4,000 active traders
currently.
Briefing.com commentary: E*Trade is clearly not content with being in the transaction business.
Last May, E*Trade announced Destination E*Trade and their strategy of becoming a
complete financial portal, with the goal of selling mortgages, loans, credit cards, etc. This
strategy was remarkably absent from the presentation. Briefing.com was always skeptical of it
to begin with, when was the last time you got a mortgage from your broker? The direction
talked about today, of further technology investments in the trading infrastructure, seems much
more suited to long term E*Trade success, and is more in line with Schwab's strategy of
international expansion, and Ameritrade's strategy of investing in clearinghouses. Overall, the
presentation seemed very strongly received, with a lot of interest in the company. After all,
every institutional investor and money manager understands this business.
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