Prospects For Tech Vendors Clouded By Market Rout, Muni Consolidation

Coupled with recent layoffs in the municipal bond departments at Salomon Brothers and Kidder Peabody & Co., the collapse in stock prices ushered in a mood of uncertainty about technological investment on Wall Street.

But most executives contacted last week say the outlook for suppliers of financial information and trading systems depends whether the slump is permanent.

"Everything is going ahead as planned," says William Rothfarb, manager of market data at First Boston Corp. "There hasn't been any change because of one day," referring to the 508-point plunge in the DJIA.

Nevertheless, the dizzying descent in equity values had a sobering effect on technology personnel. "The growth of financial information companies could be affected by regulatory intervention," suggests Jonathan Scheer, manager of electronic products and services at Moody's Investors Service.

Drexel Burnham Lambert analyst Andrew Wallach says the market for financial information and trading systems must be viewed as several markets. Vendors directly linked to the retail sector of the stock market -- like Citicorp's Quotron Systems Inc. subsidiary and Automatic Data Processing Inc. -- are the most vulnerable to cutbacks in spending.

At the other end of the spectrum, Wallach considers the foreign exchange market most resistant to a downturn, saying it is unlikely that fixed rates will ever be adopted.

Layoffs and consolidations at brokerage firms and banks will translate into slower growth for financial information vendors, says Scheer. "Growth is not going to be unbounded," he says.

However, one school of thought says that quotes, news, and analysis become more important in a volatile or declining market. "Even if people are losing money, they still have to get their information from somewhere," says David Beasley, marketing director of Money Market Services Inc.