Goldman-Led Group of Firms Buys Perzo to Form Instant-Messaging Company

Fourteen Financial Firms Invest $66 Million

By JUSTIN BAER WSJ
Fourteen of the world’s biggest financial-services firms bought Perzo Inc., an instant-messaging software company, and formed a new technology company that aims to change the way traders communicate.
Led by Goldman Sachs Group Inc., the consortium invested $66 million in the venture, called Symphony Communication Services Holdings LLC, according to a statement from Symphony.

Symphony in turn acquired Perzo, a two-year-old startup founded by veteran communications-software executive David Gurle. Goldman contributed its in-house messaging developments to the new company, which Mr. Gurle will lead as chief executive.

The deal, announced Wednesday, capped months of negotiations that had widened recently to include additional banks. In addition to Goldman, Bank of America Corp., Bank of New York Mellon Corp., BlackRock Inc., Citadel LLC, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, J.P. Morgan Chase & Co., Jefferies LLC, Maverick Capital Ltd., Morgan Stanley, Nomura Holdings Inc. and Wells Fargo & Co. invested in Symphony.

In the statement, Symphony said it expected that many of the financial firms would be early users of the company’s messaging platform.
“Symphony responds to a pressing need across the industry for better methods of communication and collaboration,” Darren Cohen, global co-head of the Goldman principal-investing arm that spearheaded the talks, said in the statement.
The group’s breadth underlined an industrywide push for software that lets employees trade messages instantly and securely. It also highlights Wall Street’s desire to put pressure on one of its biggest vendors, Bloomberg LP. Bloomberg’s communications services remain a ubiquitous presence on trading floors, and the price the data company charges for its terminal—some $20,000 a year—continues to vex bank executives charged with wringing costs out of their trading businesses.
A Bloomberg spokesman declined to comment.

The deal is also a reunion of sorts for Mr. Gurle, who worked with Goldman and other banks during previous career stops at Microsoft Corp., Thomson Reuters Inc. and Skype. He founded Palo Alto, Calif.-based Perzo in late 2012.

In a blog post on Symphony’s website, Mr. Gurle wrote that the new company’s messaging platform “is intended to be used by some of the most time-conscious firms on the planet who are regularly corresponding high-value information—where a delay of a few seconds can have significant cost implications.”
He wrote that Symphony would be available to all financial firms by mid-2015.

The Wall Street Journal reported last week that the bank group was also in talks with one of Mr. Gurle’s former employers, Thomson Reuters, over ways to integrate their messaging platforms.

On Wednesday, a Thomson Reuters spokesman confirmed the data company had held discussions with Symphony.

The news services of Bloomberg and Thomson Reuters compete with Dow Jones & Co., publisher of The Journal.
Write to Justin Baer at justin.baer@wsj.com

Why Thomson Reuters and Markit could give Bloomberg a run for its money

The privacy scandal that shook Bloomberg in May could be coming back to bite it. Today, Markit and Thomson Reuters formally announced their new messaging system for finance professionals, Market Collaboration Services. It seems designed to compete with the chat function on Bloomberg terminals, to which Bloomberg owes part of its dominance as a data provider. The two companies said today that Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase and Morgan Stanley were all on board.

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We’ve written before that Thomson Reuters will have a hard time unseating Bloomberg. But traders, bankers, and other financial services professionals we’ve spoken to over the last few months have raised a number of points that lead us to believe that Thomson Reuters and Markit could be more successful than we thought:

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Concerns about snooping and data privacy really shook bankers up. In May, Bloomberg admitted that its reporters had access to information about its customers’ usage of their Bloomberg terminals, and there were complaints that they were using it to write stories. Though the fury may have faded, the message has not; third-party technology can pose a threat to the secrecy of the firm. The Markit/Thomson Reuters offering was created in close collaboration with banks and is more customizable, so it may enjoy a certain level of trust.

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Not everyone needs a Bloomberg. Bloomberg terminals cost around $20,000 per year, something Wall Street has long seen as a necessary evil. But maybe no longer. “For some big banks, it’s an incredibly expensive instant messaging device,” an executive at one market infrastructure company told the Financial Times (paywall). “They’re saying, ‘we’re spending $120m a year on Bloomberg. That needs to come down’.”

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Sharing is caring… about costs. Major banks have already made the decision that employees can share a terminal in some cases, and used the savings to buy cheaper plans from Thomson Reuters that can be customized to fit an employee’s role. A commodities trader, the thinking goes, doesn’t need all the same tools a banker advising on tech mergers does. By contrast, Bloomberg terminals are one-size-fits-all; if you buy a terminal, you have to take all the features it offers even if you don’t need them.

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This is already happening; one banker who was not authorized to speak on his bank’s behalf said his team had seen its number of Bloomberg terminals cut down to one, replaced by Thomson Reuters Eikon terminals. The team shares the remaining Bloomberg terminal.

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A stand-alone chat function makes a lot of sense. In an email, Thomson Reuters said it “aims to create the largest financial markets messaging community and remove barriers to cross-market communication.” This means installing the messaging service on as many machines as possible, even ones that don’t even receive data feeds. Therefore, employees across the business could have access to the secure chat feature. If fewer bankers have their own Bloomberg terminals, they will need an alternative chat service to communicate with those colleagues that don’t have them.

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Clearly, this isn’t a transition that will happen overnight. But with cost pressures mounting and reception already warm, Markit and Thomson Reuters seem to have a better shot at taking on Bloomberg than you might think.

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Bloomberg declined to comment.

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