Currency Swings Boost Reuters Earnings; Windfall To Be Invested In Yet More Development

The pace of product development at Reuters Holdings PLC shows no sign of letting up and is likely to accelerate. As it previewed its new Equities 2000 terminal to securities analysts, the company said a robust second half of 1986 will lead to greater spending on marketing, network, and product development. "Two or three more" acquisitions are also likely.

In his presentation to analysts in New York December 9th, managing director Glen Renfrew hinted at overall revenue growth in excess of 30 per cent and earnings growth over 40 per cent for the second half of 1986. Currencies moved in Reuters's favor, he says, and the windfall will be diverted to accelerate development.

Customers outside North America are already getting equities data from the new Reuters ticker plant, Renfrew says, so the upcoming conclusion of the Reuters-ADP relationship simply means an end to royalty payments and new freedom for ADP to compete around the world. "Eight major New York houses" have agreed to be beta test sites for the 56 kilobits/second integrated data feed (MTR, November 1986), and Rich, Inc.'s new Triarch system will be involved in several of these.

Other points made by Renfrew include:

-- Instinet's trading volume is up 48 per cent year to date. Reuters plans to integrate Instinet 's central computer and network with its own. Trading of equities during time zone gaps between exchange hours will be a major growth area.

-- Reuters now has 1,500 subscribers to the Monitor dealing service. There had been some rationing of growth in dealing while facilities were expanding, but that has ended. The opening of Japan was the major development.

-- Of the 17,000 Reuters terminals in the U.S., 13,000 are for foreign exchange and 2,000-3,000 for domestic money markets.

-- Rich, Inc.'s order book is "excellent" -- with growth to come not only from new orders, but also from upgrading existing systems to color and digital switching. Several of the firm's recent acquisitions came to Reuters's attention because they were displayed by customers on Rich systems.

-- The technical problems experienced by the London Stock Exchange following Big Bang provided no direct benefit to Reuters, but indirectly helped the company's image as some users muttered under their breath, "Reuters should have provided SEAQ."

Analysts got a first look at the Equities 2000 terminal, which had debuted several weeks earlier in London at a Reuters conference running parallel to the Computers in the City show (where Reuters didn't exhibit; see related story, this issue). Beta test sites are currently being selected, and the company expects installations in the U.S. to begin before the end of the first quarter of 1987.

The Equities 2000 is not to be confused with the new high-speed equities feed, which is a different product. "We will either sell you one or the other," says Reuters spokesperson Mike Reilly. The Equities 2000 is a terminal designed for the Monitor network -- for customers, mostly institutional, now subscribing to the page-based international equities service via Monitor.

The new system's controller is built around twin Intel 80282 processors, says Reilly, one handling screen display on up to six keystations and the other handling communications and data storage. Each keystation comprises a high-resolution color monitor and an ART keyboard. Unlike the existing Monitor service, the Equities 2000 provides live screen updates.

Features include up to 50 user-defined quote lists per station, a news headline cache, limit minding on up to 48 stocks per station, six pre-defined and four user-defined quote masks, chaining for any series of options, futures, or floor-quoted bonds, and windowing. Pricing hasn't been determined, says Reilly.

Separately, Reuters says 7.9 million Instinet Corp. common shares were tendered prior to the December 11th deadline (MTR, November 1986). Of the total, 2.46 million were tendered under notices of guaranteed delivery within eight business days. The company says the pro-rata allocation for the cash tender offer will be announced as soon as possible after the December 23d delivery deadline. The tender offer called for Reuters to purchase up to 5.1 million shares for $8.50 cash, with the balance outstanding to be swapped for $8.50 worth of Reuters ADRs.

Meanwhile, Reuters and Instinet say an Instinet shareholder has filed suit against Instinet, its board, and Reuters, charging breach of fiduciary duty in the merger. The suit alleges that the $8.50 price is unfair. The companies say the suit is wholly without merit and they intend to contest it vigorously.