The Bloomberg spying saga took a number of twists and turns over the weekend, culminating in Matthew Winkler, Bloomberg’s editor in chief, acknowledging the company’s “inexcusable” practice of granting reporters access to client information stored in Bloomberg terminals. It’s a huge black eye for Bloomberg LP, but it’s far from a death sentence. Here’s why.
The reputation of Bloomberg News will undoubtedly take a hit, but the journalism wing is far from a cash cow. It’s Bloomberg’s flagship terminal business, which accounts for 85% of the company’s revenue, that executives are likely fretting over.
While Bloomberg may lose a customer or two, clients won’t go running off to rival terminal vendor Thomson Reuters in droves. Traders who can afford Bloomberg (its terminals are much more expensive than those of rivals) will likely stay on because they have no choice. Bloomberg terminals are like highways on Wall Street. Traders can take the side roads and go with a rival product, but they’ll end up arriving late to the party every time.
One trader told us that some clients simply won’t work with traders who aren’t operating on Bloomberg. Communication is just too painful. Another said his firm moved to Thomson Reuters two years ago, but gave employees the option of sticking with Bloomberg if they paid the difference themselves. More than half of the traders at his firm are now paying more than $500 a month out of pocket to remain with Bloomberg.
Bloomberg is known to be more user-friendly, offer more compelling products and, most importantly, it has Instant Bloomberg (IB), the terminal’s IM service. Unless it’s for fiscal reasons, switching terminal vendors is a difficult task.
If banks are too big to fail, Bloomberg may be too well engrained into the fiber of Wall Street to quit.
Lazard Capital Markets is considering selling a minority stake of its business, among other strategic options, to increase the value of its franchise. Broker-dealers like Lazard are seeing their commissions get pinched as trading markets have evolved. The firm cut six senior research analysts in December.
Tolga Uzuner, the former international head of equity and corporate credit at J.P. Morgan’s infamous chief investment office, has left the bank and is said to be prepping a new hedge fund.
Marex Spectron has closed its foreign exchange desk in New York and cut staffers in London. The firm, known for its commodities futures brokerage business, wasn’t seeing the value from its FX unit. Marex continues to hire in commodities.
IRS staffers who targeted specific groups based on their political affiliations will be “held accountable,” according to President Obama. His comments follow news reports that some IRS employees discriminated against members of the Tea Party.
If J.P. Morgan Chief Executive Jamie Dimon is stripped of his chairman role, he’ll likely leave the bank. If that happens, J.P. Morgan shares could plummet by as much as 10%, according to one analyst.
Anthony Chiasson, co-founder of hedge fund Level Global Investors, was sentenced to more than six years in prison after being convicted of insider trading in December.
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