Whither Signal After This Season's Push?: MTR Interviews Lotus's Don McLagan

Lotus Development Corp. is spending a reported $2 million for fourth-quarter advertising to launch its FM-based broadcast quote product called "Signal" (MTR, October 1985). Lotus is hardly what you'd call a traditional market data vendor. To get a sense of how the world's largest PC software supplier sees the market, we spent a few minutes one afternoon talking with Don McLagan, the former Data Resources, Inc. executive recently recruited by Lotus to run its Information Services Division:

McLagan: If you look at the traditional market for it, it's certainly saturated. If you look at registered reps -- I guess they're called financial planners these days -- and traders, they all have a Quotron or a Bunker Ramo or an ADP at their elbow. That market's probably 90 or 100 per cent penetrated. So the likelihood of it getting much bigger is not much. I think there is an opportunity to capture some share in that marketplace with a good PC product, if some of those people are going to be PC-oriented instead of dumb terminal-oriented. On the other hand, Bunker Ramo or in particular ADP -- and also Quotron -- have made some steps in that direction.

There are, however, a lot of other people that could use stock quotes that are more computing-and analysis-oriented than are the registered reps or the traders. In particular, there are the people in corporate finance departments, people in the securities analysis departments, and the people on the money management side, for whom the real time stock quotes are important, but where computing and analysis such as you can do on a PC is relatively more important than it is to an RR who really ought to be spending his time on the telephone relating why I should buy or sell Lotus because it's 21 3/4 -- rather than developing some slick analytic model that gives him an insight relative to everybody else in the world.

McLagan: Yes, that's one first row. Then there's all the individuals in small businesses, small financial planning firms that help you and me figure out how we put money away today to take care of our kids in the future. There are the small money market advisors and money managers that are places for this, and there are people with substantial portfolios. Our market research suggests that there's 1.2 million people with $100,000 or more a year of annual income, and we know that some good proportion of those people have PCs, and we believe that there's some good reason to connect up those PCs with stock prices and that would be attractive to those individuals.

So you might think about three levels to the market. One is the great big guys, the Paine Webbers and Merrill Lynches and so forth, the other might be the middle-level guys, where you might think about financial planners, and money market advisors and that sort of thing, and then the low end where you have individuals. Now Lotus is fairly well-penetrated relative to traditional information providers on the low end, and if there's going to be a market for real time stock quotes there, it's more likely that Lotus will get to them than anybody else.

There are other data that one might want to have access to, such as the fundamental data. There is software associated with that that allows you to screen across five or six thousand publicly held companies' earnings and current price to figure out which has the highest and lowest P/E ratios, and to compare that with the companies that have the highest and lowest growing earnings records. That's a software issue, and that's something that I see us having an interest in.