Still Lacking A Revenue Stream, EJV Plans New Evaluation Service

EJV Partners L.P. has instigated another strategy shift. This time it will offer data evaluation services, drawing on the fixed-income databases that are now bundled with the EJV's UniVu data and analytics platform.

The new services include historical pricing data, descriptive data and daily evaluations, and will be available via a separate local server from the one supporting standard UniVu service. It will also eventually be accessible by remote dial-in.

The strategic shift comes as the EJV finds itself under increasing pressure to deliver a revenue-producing product. Although it was officially released seven months ago (IMD, Aug. 3, 1992), UniVu has yet to generate a single dollar of revenue, say sources close to the EJV.

These sources say that the EJV now holds letters of understanding from customers guaranteeing it a revenue stream of more than $20 million annually -- if, that is, the EJV comes up with a version of UniVu that complies with requirements outlined in those letters.

While confirming the letters' existence, EJV president Bruce Peterson contends that some revenue has already begun to come in. He says some users started paying terminal fees in December. The amount they're paying, however, "is not significant relative to the $20 million" expected, Peterson adds. Another source says that any fees coming in are coming exclusively from EJV partner firms.

While some sources close to the EJV accept that the lack of revenues is a direct result of the lack of a viable product, others feel the EJV has cut its customers too much slack.

These sources say that the letters offer customers enough room to justify non-payment regardless of how the product turns out.

One source close to the EJV says that the vendor expects to have some eight non-partner firms paying for UniVu service as of May 1 and another eight in June. If indeed the 16 or so customers begin regular payment for UniVu, the EJV could be here to stay. An EJV spokesperson declines to comment on the company's revenues.

But unbundling the descriptive and pricing data from UniVu could hurt future sales. With the databases available separately, the UniVu platform itself is left with little more than a handful of analytical applications and communications tools to recommend it.

Peterson contends otherwise, asserting that "we have always planned to unbundle valuations." He says that the market for pricing valuations is different from the one now targeted for UniVu, and thus won't cannibalize the original product's potential customer base.

Sources say the EJV has dubbed its new product line simply Data Services. Data Services will offer descriptive and pricing data plucked from all six partners' internal databases and from databases purchased from the now-defunct Drexel Burnham Lambert Inc. Sources say valuations can be updated continuously, or on a daily, weekly or monthly basis.

The services will include data on government, corporate, agency and mortgage-backed securities, as well as exchange-traded futures and options on fixed-income instruments. For historical data users, the EJV will offer five years of Treasury prices and two years of corporate prices.

Customers will initially need a local server to access data, although remote connection is slated to be added later, according to Peterson. Remote access may finally improve the EJV's ability to penetrate institutions and smaller users that may have been put off by the high-tech, high-cost platform that UniVu runs on. It will also open doors that UniVu couldn't, such as at custodian banks.

Peterson estimates the size of the new services' market at some $200 million a year, now served by the likes of Thomson's Muller Data unit and Merrill Lynch & Co.'s Securities Pricing Service.

To build and support the service, the EJV has hired staff, poached from McGraw-Hill's Kenny Evaluation Services group and elsewhere. Heading the team is ex-Kenny John Lynch, now an EJV director. When the EJV was slashing companywide headcount by 12 percent in January (IMD, Jan. 18), nine new hires were planned to provide data valuations.

The hires were mandated both by the new product plans -- and by the unexpected difficulties the EJV encountered in getting the partners' data consolidated and ready to roll.

Sources indicate that the partners had overestimated the quality of their databases, and that later the EJV spent more time and effort than initially planned in cleaning the databases.

"We found that it was more a matter of filling in than cleaning up," says Peterson. To build the databases, says Peterson, the EJV used data from at least two partners firms for every data type.

For CMO (collateralized mortgage obligation) valuations, for example, the EJV uses Goldman Sachs & Co.'s data as a primary source and data from First Boston Corp. for comparison and cross- checking. Peterson says that generating a reliable CMO database from the two partners' data proved particularly time-consuming, partly because of the need to translate modeling languages used by the different firms.

Much of First Boston's CMO data is also available via Bloomberg terminals free of charge.

Users who wish will be able to upload their portfolios for valuation, using such standard portfolio management systems as those used by Shaw Data Inc. Thomson's Portia.

With descriptive data, the lack of a clear industry-standard forced the EJV to establish its own standards for data fields, says Peterson.

The EJV last revised its strategies in October, when the vendor expanded its top executives' mandates, urging non-sales and marketing executives to concentrate on partner firm needs and courting potential new customers (IMD, Oct. 12, 1992).

At that time, Peterson said the UniVu product was near enough completion to warrant fewer resources devoted to its development.

Further changes were forced by the departure earlier this year of EJV sales and marketing chief Gerry Mintz, who departed following what sources say were personal differences with Peterson.

A replacement for Mintz will be named this month, says Peterson, who adds that one candidate is under consideration from within the EJV and others from outside.

While partners have continued to provide funding for the EJV's ongoing efforts, sources say further investment is not guaranteed. First Boston, along with its CMO data, is providing Treasury data and order-routing links via EJV rival Bloomberg.

Sources also point to Salomon Inc.'s move to give its institutional customers much of the Yield Book application free last year. Yield Book was a key Salomon contribution to the partnership and was to form part of UniVu's core analytical application set.

Salomon has also taken a step in Bloomberg's direction, installing some 70 stand-alone terminals from the vendor to end a long-standing near-ban on the services (IMD, Feb. 15).

Regarding the partners' response to the valuation service, Peterson says: "Several were instrumental in encouraging us to develop this product."