Lotus's Signal At One Year: Hasn't Met Expectations, But Is Doing Better Than Most

Lotus Development Corp.'s first year as a market data vendor has been bittersweet and ironic. While sales of the firm's Signal quote service have fallen far short of original expectations, Lotus has managed to gain a foothold in certain niches, and claims to be growing faster than most of its competitors. Meanwhile, the Quotrek hand-held receiver, which Lotus originally had hoped would go away quietly, has turned into a star performer.

"It's hard work and it's frustrating and there are differences in expectations but by gosh we're going to make it work," says Don McLagan, vice president and general manager at Lotus's information services division. "The Lotus commitment to information services is very high and has been doubled and redoubled."

It was on September 17th last year that Lotus unveiled its plans to provide market data to users of its 1-2-3 and Symphony software (MTR, October 1985). While company officials decline to discuss sales or sales forecasts, sources say that senior management was convinced a year ago that Lotus's marketing magic would result in sales of 10,000 Signal units during its first year. Actual sales, we estimate, have been more like 2,000 units.

"The growth of the [Signal] business has been slower than expected," McLagan admits. Lotus has learned that "it is unlikely that you can get people interested in a new information service through advertising and promotion and expect them to follow up on it by going out and buying it." An information product, he says, "must be sold. It isn't likely to be bought." As a result, Lotus has decided to "concentrate on a couple of retailers who will devote time and energy to seminars and training their sales reps on the product."

Nevertheless, Signal has made a few inroads. "I think we're becoming acknowledged as the best provider of options data, which is a fairly analytic-intensive group," says McLagan, who claims Lotus is now "a market share leader in that business." In addition, although Signal did not take off like 1-2-3, "we are growing very well compared to other people in the quote or information business," he says.

While Signal has failed to meet Lotus's early expectations, the other fruit of its Dataspeed acquisition -- the portable Quotrek receiver -- has done surprisingly well. Sources say Lotus officials originally thought the Quotrek was an ugly duckling, a standalone product with absolutely no strategic fit to the company's PC customer base. At last year's Signal introduction the Quotrek was not even mentioned, and since then Lotus has marketed the product only through third-party channels.

But sources say that not only has Quotrek managed to outsell Signal, but it survived a recent subscription price increase with virtually no churn. "We've just got to pay more attention to it. It's doing too well to ignore," says McLagan. "Indeed, we've learned some lessons from it on what to do with Signal."

Since both share the same data, what to do with Signal is inextricably linked to Quotrek. Lotus would like to add more data to the Signal FM sideband quote stream -- bid/asked prices, warrants, and preferreds -- and sources say an upgrade program, code-named "Casino," is in the works. But Signal can't be easily upgraded without disrupting the installed base of Quotrek users.

"That is a problem that needs to get solved and we're looking at a variety of solutions," says McLagan, but "we're not going to do something that's going to turn off all of our Quotrek users." Two solutions are under strong consideration, sources say. One would move the Signal quote stream entirely onto another FM sideband network. The other would involve a hardware retrofit to existing Quotreks.

However, Lotus's future as a quote vendor is not to be just a quote vendor. "If you just look at the quote business I think you're missing the mark on what the marketplace seems to be moving towards," says McLagan. "I think that you're seeing convergence on the IBM and compatible PC as a workstation. Specifically that is not Unix-based systems. Specifically that is not Convergent Technologies-based systems. The marketplace seems to be moving toward the place where Lotus is strong."

Thus emerges the concept of the analyst's workstation at which proprietary data from the company mainframe, fundamental data from Compustat or Value Line stored on CD-ROM, and real-time market data from Signal can be downloaded directly to the 1-2-3 spreadsheet. "There really is an architecture here," says McLagan. "Lotus has made a big bet on it."