LOS ANGELES - Move over, Bloomberg - make room for Capital Management Sciences Inc.
CMS, known for its high-end, fixed-income computer analysis products, like BondEdge for Windows, intends to launch a Bloomberg-like electronic financial information service over the Internet, called In-Sight.
The service would undercut the cost of Bloomberg's by about 66%.
Officials of CMS, Los Angeles, want to sell their services to hundreds of thousands of potential customers - including pension funds, small money managers and high-net-worth individuals - who can't afford Bloomberg or other high-priced competitors.
Jim Kaplan, CMS president, recognized the possibilities of the Internet when he was looking for faster ways to send pricing data to BondEdge clients.
Michael Bloomberg, president of Bloomberg L.P., New York, claims it will take a year or two for the Internet to be sufficiently reliable and quick to transmit his kind of services.
He depends primarily on leased telephone lines for transmission.
Mr. Bloomberg sneers at CMS, saying, "I vaguely remember hearing their name, but I can't say I know more than that."
Actually, CMS' BondEdge product typically costs more than the Bloomberg service and is considered by some an industry standard in fixed-income analytics.
CMS officials claim the Internet can and does deliver reliably in real time, despite mismanagement of some Internet service operations that create widespread public misperceptions.
Mr. Bloomberg's Internet criticism is a "scare tactic," said Dennis Santiago, CMS vice president for corporate development.
Mr. Bloomberg himself "would be crazy not to be thinking about it (using the Internet)," he said.
The Internet, CMS officials believe, is creating a structural change in the delivery of financial information.
They claim Bloomberg is slow to move to the Internet as a primary source of transmission because it is trapped in its own infrastructure of outdated technology.
Bloomberg is best known by the general public for its television, radio and news wire services. But 97% of its revenue is tied to its financial information services that come to investors over computers, according to Mr. Bloomberg.
Bloomberg's PC product delivers fixed-income and equity security pricing data, equity research, global market information and news. It also provides electronic trading, analytical software and historical data.
Much of the information that comes across on a Bloomberg terminal can be purchased separately, although Bloomberg does have some proprietary information, CMS officials say. What Bloomberg itself says it has done is package the information in an easy-to-use format.
Bloomberg's service is loved by the institutional investment community. Mr. Bloomberg says he has 82,500 clients so far, with the client list growing 30% a year.
But the price of the service is an issue. Bloomberg's service license for one terminal costs just less than $1,200 a month, according to Mr. Bloomberg.
Mr. Bloomberg believes there are hundreds of thousands of people who would like - but don't yet have - the Bloomberg service.
That's because they can't afford it, said Teri Geske, CMS vice president for product development.
And that's what CMS wants to change.
Officials at CMS and its parent, Data Broadcasting Corp., Jackson Hole, Wyo., say they can undercut Bloomberg's price by using the Internet.
The Internet has dropped delivery of electronic information prices "virtually to zero," said Ms. Geske.
CMS intends to package its product with a single security fixed-income calculator, BondVu. It will include information on corporates, governments, mortgage-backed securities, collateralized mortgage obligations and some asset-backed securities.
Included in the basis cost will be research from Multex System Inc., Jersey City, N.J., and technical charting. Other services, such as additional news sources, can be added at additional cost.
Much of the equity data will come from CMS' parent and some of the fixed-income data will come from CMS' BondEdge.
CMS' product will have 80% of the "utility" of Bloomberg's service, said Mr. Santiago. It won't offer electronic trading, at least in its early release, as Bloomberg does. In-Sight is scheduled to be launched by the end of the year.
But Mr. Bloomberg contends, "The Internet today is not consistent enough, reliable enough for professionals to use when they need a response the instant they hit a button.
"The Internet is getting better every day, but it is not there yet."
He said he does broadcast his service over the Internet, but only for about 5,000 clients who need to access it in remote locations and are willing to put up with the Internet's problems.
Reuters sees Internet problems
Another provider of financial information is Reuters of America Inc., New York. Spokesman Robert Crooke agrees there are problems with the Internet.
Mr. Crooke said Reuters 3000, a financial information product that competes with Bloomberg, is delivered through leased telephone lines, FM-band broadcasting and satellites and over the Internet.
Real-time delivery, meaning instantly, is critical for financial traders making major financial decisions.
However, CMS' Mr. Santiago said the Internet can deliver information as fast and reliably as a leased telephone line.
It's not "common knowledge yet" that the Internet can handle information in real time, said Mr. Santiago.
Some Internet providers with narrow bandwidth add too many customers and choke communications, he said.
"It's not a matter that the Internet technology isn't there, it's a question of whether the (provider) is using a method appropriate for accessing the Internet for the job you are trying to do," said Ms. Geske.
Competing on quality too
Being able to compete with Bloomberg isn't just a matter of speed, but also a matter of the quality of information.
Ms. Geske said prospective clients will check the data on CMS' product against data they trust. If the data CMS sells isn't high quality, people won't buy it.
Bill Cunningham, chief investment officer at Creative Investment Research, a small money management firm in Washington with $25 million in tax-exempt assets under management, said he would consider using CMS.
"If (CMS) is going to come out with a product that has real-time or close to real-time, that would be really very interesting," he said.
Mr. Cunningham does not use Bloomberg, but thinks it sells an excellent product.
Alan B. Lancz, chief investment officer at Alan B. Lancz & Associates Inc., Toledo, Ohio, also doesn't use Bloomberg. "We would definitely look into" CMS' product, said Mr. Lancz.