Reuters, once a carrier-pigeon service, is flying high in high-tech
One hundred thirty-five years ago, an enterprising journalist named Paul Julius Reuter started a news service using carrier pigeons to send stock market prices from Brussels to Germany. The agency that bears his name, Reuters Holding PLC, is now a news and financial-data empire stretching around the globe, transmitting information by computer 24 hours a day to 158 countries.Skip to next paragraph
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Along with the latest on coups in Africa and strife in the Middle East, Reuters also offers subscribers economics information and quotes ranging from oil prices to Eurodollars.
Now, in an effort to capitalize on its success, the company has begun an expansion drive in the United States and other highly competitive communications markets where subscribers are not only able to retrieve information but also to process it.
``We want to have the biggest and best array of data bases we can for the markets we've chosen to serve -- banking, securities, commodities, and energy,'' says Glen Renfrew, managing director of Reuters. ``We want to have a communication network second to none that attracts people to inject information.''
Reuters customers can now trade in currencies, commodities, and stocks worldwide on a screen-based system, called the ``Reuter Monitor,'' that displays news and prices. Within this system, one of the most well-known innovations has been an automated foreign exchange service which allows direct contact with dealers in various countries and quick trades.
In recent years the growth of Reuters internationally has positioned the company to tackle the lucrative US financial data market, where it has always ranked second to Dow Jones & Co. Two major gaps in business news coverage have hampered Reuters in the US: a lack of instantaneous US stock market quotes and an inability to provide US government security prices.
Until recently, Reuters has not been able to challenge the monopoly in the US government bond market held by Telerate Systems Inc., an electronic business information group owned by Dow Jones.
Reuters has also been harmed by inadequate marketing expertise and lack of the kind of detailed stock quote information one of its rivals, Quotron Systems Inc., offers. ``Reuters has been slightly slow off the mark'' in the US, one analyst says. ``Until recently, its approach was ultra-British . . . If you're selling services to an oil trader in Houston, you don't wear a pin-striped suit.''
Mr. Renfrew, however, says the lower Reuter profile in the US is the result of limited financial resources, which prompted the company to move ahead in other markets like commodities, requiring less capital and competition. Now, however, Reuters is taking active steps to beef up its American presence and create a broader worldwide securities dealing system.
This past spring, the company signed a contract with the New York-based MKI Securities, an interdealer broker that has recently expanded into the government securities market. The agreement calls for MKI to supply Reuters with government security quotes to be transmitted to MKI customers via Reuters.
And Reuters is holding talks with American companies in an effort to be able to supply instantaneous stock quotes in the US. Moreover, in February, Reuters paid nearly $60 million for Rich Inc., a Chicago-based supplier of communication systems for dealing rooms.
A month later, Reuters announced a deal with New York-based Institutional Networks Corporation (Instinet), which has developed an automated trading system for equities and options in the US. This allowed Reuters to market the dealing service outside North America, and the news agency plans to add quotes of other international securities if it can reach agreement with overseas stock exchanges.
Reuters is also considering acquiring a stake in Instinet and offering the system for use on the London Stock Exchange. And although Reuters recently suspended discussions with United Press International, the financially troubled news service based in Washington, the possibility of an eventual acquisition remains.
The Reuter strategy of focusing on the business information market has paid off handsomely. In 1960, business news contributed only a negligible portion of the company's total revenues of 2.4 million. In 1984, business data sales contributed about 76 percent of total Reuter income of 312.99 million (about $431 million).
The British media barons who own Reuters capitalized on the agency's rapid growth and last year sold 29 percent of the company for about 210 million ($290 million) to pay for acquisitions and expansion.
The possibility of such lucrative profits has prompted IBM, Merrill Lynch, and American Telephone & Telegraph to enter the financial information market. In the face of such competition, Reuters is adding more services to its network of 53,433 teleprinters and terminals. These include compilation of historical data on financial instruments so that, for example, a Eurobond subscriber can view a graphics package charting a bond's performance from the date of issue to the latest closing price.
Since Dow Jones recently bought a large stake in Telerate from Exco International, one of Britain's leading money brokers, analysts believe the American business information giant might pump more money into expanding Telerate in Europe, eventually making it a formidable competitor overseas to Reuters.
When Reuters went public, it adopted safeguards to protect the news agency's reputation for impartial reporting. Among them was the creation of a ``golden share,'' which Reuters trustees could use to outvote any attempt to take over more than 15 percent of the company, and the establishment of a weighted voting structure.
This gives newspaper owners, who already hold a majority of Reuter shares, greater voting power and protects the news agency's independence.