Bloomberg L.P.

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Bloomberg L.P.

499 Park Avenue
New York, New York 10022
U.S.A.
(212) 318-2000
Fax: (212) 980-4585
Web site: http://www.bloomberg.com

Private Company
Incorporated: 1986
Employees: 3,000
Sales: $1 billion (1996 est.)
SICs: 7371 Computer Software Systems, Analysis & Design; 7375 Online Information Retrieval Services; 7379 Database Developers; 7377 Computer Hardware Rental or Leasing; 7383 News Reporting Services for Newspapers & Periodicals; 4832 Radio Broadcasting Stations; 2721 Magazine Publishing; 2731 Book Publishing

Bloomberg L.P. is a diversified information and media company, the core business of which is the leasing of a multifunction computer terminal to primarily financial and information industry customers such as banks, securities brokerage firms, government agencies, and media organizations. More than 75,000 such dual-screen terminals, known as “The Bloomberg,” were used by more than 140,000 organizations in more than 90 countries in 1997, including the White House, the Vatican, the Bank of England, the Federal Reserve, the Sultan of Brunei, and the World Bank. Available in a standalone, a portable, and an “open,” or PC-connectible version, the Bloomberg provides multimedia news, electronic communications, specialized financial computation services, and financial pricing and other data for all the major global securities markets including equities, money markets, currencies, municipals, cor-porate/Euro/sovereign bonds, commodities, mortgage-backed securities, derivative products (such as futures), and government securities.

Besides its core data terminal business, Bloomberg’s diversified media products include Bloomberg News (a news agency/wire service), Bloomberg and Bloomberg Personal magazines, Bloomberg Business Radio, Bloomberg Direct TV, Bloomberg Small Business TV, and Bloomberg Personal Online (an Internet site). Its oldest media venture is Bloomberg News, a global network of some 500 journalists who produce 3,000 business stories a day in five languages from more than 50 news bureaus worldwide.

Bloomberg L.P. also maintains a large in-house staff of data collectors (Bloomberg Princeton, New Jersey), sales people, and computer programmers and technical personnel. Forbes magazine ranked Bloomberg L.P. 223rd in the 1996 Forbes 400 (by sales), and media mogul Rupert Murdoch has described Bloomberg’s founder, Michael Bloomberg, as “the most creative media entrepreneur of our time and, with Bill Gates, perhaps the most successful.”

Desktop Data for the Bond Trader: 1966-1984

After earning an M.B.A. from Harvard University in 1966, Massachusetts native Michael Bloomberg joined the Manhattan securities trading firm of Salomon Brothers as a security counting clerk and worked his way up the ladder until by the early 1970s he had been named chief of the firm’s equity trading operation. By the late 1970s he had been placed in charge of developing the firm’s in-house computerized financial system, but office politics and Salomon’s merger with commodities-trading firm Phibro Corporation led to his ouster in 1981. As a partner in the firm, Bloomberg was entitled to sell his share back to Salomon, however, and at age 39 he was freed to make a fresh start with a tidy fortune of $10 to $20 million. Rather than retire, Bloomberg decided to start a new business and, joining his experience with computers to his background in the finance markets, he began to envision a computerized information system that would allow Wall Street firms to tap into a real-time store of market data, financial calculations and projections, and other “analytics” via a computer terminal on their desks.

Using part of his Salomon windfall, Bloomberg assembled a group of computer programmers and in 1982 formed Innovative Marketing Systems (IMS). The only Wall Street firm interested in his idea, however, was Merrill Lynch, which agreed to buy Bloomberg’s as yet incomplete machines if he could deliver them as advertised in six months. In June 1983, Bloomberg and his three core partners, Duncan MacMillan, Chuck Zegar, and Tom Secunda, demonstrated their prototype machine for Merrill Lynch, which had specified that the device perform complicated calculations on government bonds as well as conventional pricing computations of Merrill Lynch’s inventory. Merrill Lynch was sufficiently impressed with Bloomberg’s creation to order 20 of his machines (they would eventually order 1,000), but with one catch: Bloomberg would agree not to market the technology to Merrill Lynch’s competitors for five years. To help finance Bloomberg’s development of the computer, Merrill Lynch bought a 30 percent stake in IMS for $30 million. With its start-up cost worries eased, Bloomberg and his colleagues worked to expand the machine’s capabilities with the help of Merrill Lynch traders.

By the fall of 1984 IMS was selling its all-in-one financial terminals to Merrill Lynch’s clients and unveiling a portable version of the system. Bloomberg, however, wanted to test his product in the larger market and approached Merrill Lynch to request that they release IMS from its five-year moratorium on sales to competitors. Because Merrill Lynch’s 30 percent stake in Bloomberg’s product meant it could reap some of the rewards of IMS’s expansion, it agreed to allow Bloomberg to sell his terminal to as many customers as he could find. By the mid-1980s at least 20 companies were offering screen-based news, market data, and research to Wall Street brokers and traders, and throughout the decade the financial data industry grew at a rate of 20 percent. But Bloomberg’s constantly evolving machine offered something new. Besides providing bond and stock prices and volume and other basic data, the Bloomberg (as the terminal soon came to be called) combined sources that had previously existed only in scattered paper versions or through various specialized electronic services. On Bloomberg’s machine, a trader could access roughly 40 links to in-depth information on any bond, which were displayed around a central chart displaying the bond’s current price. Moreover, the system was hardwired to offer a range of complex calculations, known as analytics, for determining the relative value of securities as well as enough color-coded keys and flashing lights to keep the system unintimidating.

Building a Brand Name: 1985-1988

Freed from Merrill Lynch’s apron strings, Bloomberg and his IMS partners set out to market their terminal to the larger financial world. With industry leader Merrill Lynch already on board, IMS’s new sales force was soon leasing Bloombergs (at $1,000 a month) to such august customers as the Bank of England and the Vatican. In the spring of 1986 Bloomberg changed the company’s name from IMS to Bloomberg L.P. and expanded his customer base from “buy side” firms—pension funds, central banks, mutual funds, insurers—to the “sell side” of the financial industry—securities underwriters and trading firms.

Bloomberg opened a London office in early 1987 with three clients, Merrill Lynch U.K., the Bank of England, and the Bank for International Settlements, and four months later launched an office in Tokyo. A chance encounter with the owner of a financial data research company led to the acquisition of Sinkers Inc. in December 1987, forming the core of the data collection and analysis operation that within a few years would become Bloomberg Princeton. (By 1996, Bloomberg’s Princeton operation would employ some 900 researchers and data-entry workers charged with sifting through thousands of prospectuses and financial statements for the data channeled through the Bloomberg terminal.)

Shortly after Bloomberg installed its 5,000th terminal, Bloomberg was contacted by Wall Street Journal writer Matthew Winkler, who had learned about the machine while interviewing a Merrill Lynch trader in London a year or so before. To his astonishment, Winkler had discovered that, along with the Associated Press, the Journal had begun using Bloomberg rather than the Federal Reserve Bank of New York as its only supplier of daily prices for U.S. government bonds, despite the fact that Bloomberg competed directly with Telerate, an electronic terminal-based bond data provider that the Journal’s parent company, Dow Jones, was just then in the process of buying for a billion and a half dollars. In September 1988, Winkler’s positive profile of Bloomberg and his campaign to unseat Telerate as a financial data industry leader was published on page one of the Journal, an irony that was not lost on Michael Bloomberg. In June 1988 Bloomberg added a securities trading feature to the Bloomberg; in October a service known as “Sabre-izing” that allowed Bloomberg users to access prices contributed by a variety of firms was added; and in June 1989 a contributor system feature was added for financial research and commentary.

Company Perspectives:

The company has established a unique position within the financial services industry by providing a broad range of functions combined into a single “package” that represents substantial value, while at the same time addressing the demand for investment performance and efficiency in increasingly complex global markets and exchanges. Through an unparalleled combination of information and analytics, Bloomberg Financial Markets has quickly built a worldwide customer base of issuers, financial intermediaries, and institutional investors. Bloomberg’s core business is the Bloomberg, the world’s fastest growing real-time financial information network, which links together the world’s leading financial professionals.

Bloomberg Business News: 1989-1991

With Bloomberg’s global network now including a new office in Sydney, Australia, Bloomberg met with Winkler again in early 1989 to explore the possibility of expanding Bloomberg’s services to include business news. He offered to bring Winkler aboard in 1990 as editor in chief of “Bloomberg Business News,” a new venture that would not only spread the Bloomberg name, and thus sell more terminals, but would free Bloomberg from its reliance on the Dow Jones News Service for the Bloomberg’s business news feature. With Bloomberg’s annual growth now far outpacing that of Reuters and Dow Jones and its revenue fast approaching $100 million, Bloomberg feared that Dow Jones would soon recognize the threat BloombeTg posed and thus decide to deprive it of one of its most valuable subscriber services. Winkler was sold on Bloomberg’s vision and began to establish a Bloomberg office in Washington, D.C. to cover the political events that affected the business world. He soon learned, however, that Bloomberg Business News needed to win formal accreditation from Washington’s Standing Committee of Correspondents (SCC), a congressionally sanctioned body that controlled who had access to the capital’s news makers. In no hurry to welcome a new competitor into the elite group of national news journalists, the SCC rejected Bloomberg’s request for accreditation, arguing that Bloomberg Business News was not carried by any newspapers and, moreover, was partly owned by Merrill Lynch, creating a potential conflict of interest. (Soon after Bloomberg News went on line in June 1990, however, Winkler had run a story casting Merrill Lynch in a negative light to establish the news arm’s independence.)

To win legitimacy for Bloomberg Business News, Bloomberg enlisted the support of the Associated Press (AP), which received its bond prices free of charge from Bloomberg and gained millions of dollars a year in compensation for allowing Bloomberg terminals to carry AP stories. But even the AP’s endorsement failed to win Bloomberg its news credentials. By chance in 1990, however, Winkler was asked by staffers at the New York Times if they could receive a Bloomberg terminal for free. Bloomberg promised them one on one condition: that the paper consider publishing Bloomberg Business News stories, with the Bloomberg byline, in the Times and its news wires whenever it deemed them “fit to print.” In 1991 the Times agreed to the arrangement, and Bloomberg Business News stories were soon appearing in the nation’s premier newspaper. Within a year every major newspaper in the United States had requested the same arrangement: free Bloomberg terminals in exchange for occasional publication of Bloomberg bylined stories. Bloomberg had won legitimacy as a national news source.

A Bloomberg on Every Desk: 1991-1993

With sales coasting toward $140 million, Bloomberg continued to add value to his core financial data terminal leasing business. In early 1990 he unveiled a portfolio system feature for the Bloomberg; a month later he launched “Bloomberg Traveller,” a service to enable subscribers to access their Bloombergs from remote locations; and in September he opened an office in Singapore. By November 1990 the 10,000th Bloomberg had been installed, and in March 1991 the machines began offering a specialized oil buyer’s guide service and a video training series for subscribers new to the Bloomberg system. Far from its early bare-bones bond data service, by 1991 the Bloomberg had expanded (with no increase in rates) to encompass prices from 18 U.S. Treasury bond dealers and 75 corporate bond dealers, news and statistics on some 15,000 companies, and more than 200 other services, including money-flow calculations and Grant’s Interest Rate Observer. Moreover, it had moved beyond its early specialization in bonds to include data on stocks, the energy markets, and such rarefied financial instruments as mortgage-backed securities. Individual stocks could now be analyzed through at least 63 screens of information, including earnings estimates and historical price performance, and stocks on the Dow Jones Industrial Average could be compared on 23 individual performance parameters. By 1991, Bloomberg was expanding its offerings at a pace of roughly one new service a day, providing everything from ski reports, weather forecasts, and real estate listings to horoscopes, classified ads, and sports scores.

By the end of the 1991, Bloomberg L.P.’s worth was approaching an estimated $800 million, and with 14,000 installed terminals it was gaining new subscribers faster than any other firm in the $3.5 billion specialized information industry. Although Reuters could claim 185,000 installed terminals, Dow Jones’s Telerate about 85,000, Citicorp’s Quotron 70,000, and Automatic Data Processing 68,000, Bloomberg had won the wary attention of its competitors, and in the early 1990s (as Bloomberg had anticipated) Dow Jones announced it would pull its news service from Bloomberg terminals. Carried over its own news wire, the announcement only served to give Bloomberg more free publicity, however, and a few months later Dow Jones reversed its policy when it discovered its embargo had had no effect on Bloomberg’s sales.

In 1992, Bloomberg unveiled a secure E-mail system known as “Bloomberg Message” for his subscribers, which anticipated by several years the Internet-driven explosion in the use of E-mail as a routine form of business-to-business communication. He also introduced a futures analysis feature for the Bloomberg and built a small TV studio in his Manhattan newsroom to allow Bloomberg Business News to tape interviews with corporate executives (a program that was soon named Bloomberg Forum). Bloomberg Business News was meanwhile establishing itself as a major player in the national business news arena, with more than 100 reporters transmitting almost 1,000 stories a day from seven domestic and five overseas bureaus. With his news service efficiently spreading the Bloomberg brand name, in 1992 he took to the air waves as well, purchasing the legendary New York radio station WNEW for $13.5 million and converting it to an all-news format under the call letters WBBR (for Bloomberg Business Radio). By November sales stood at about $290 million and 22,000 Bloombergs were installed worldwide, with 625 new terminals coming on line every month.

In 1993, Bloomberg launched a 15-minute weekday business news program for broadcast on PBS; opened offices in Frankfurt, Germany and in Hong Kong; and unveiled Bloomberg Multimedia, which enabled his terminals to display still color photos and audio from his radio broadcasts. Subscribers also now could access data on real estate, bank loans, and counter trade, and data on stock equities had grown to account for half of his new business. Each new media venture spurred a leap in sales of Bloomberg terminals, which by late 1993 numbered more than 31,000 worldwide, catapulting Bloomberg’s sales to $370 million.

Global Growth and the “Open Bloomberg”: 1994-1995

Despite Michael Bloomberg’s protestations that his multimedia ventures were only attempts to boost sales of his financial data terminals, by the mid-1990s it had become clear that Bloomberg had set his sights not merely on “catching up” to Reuters and Dow Jones but on equaling and, perhaps, even surpassing them as global multimedia giants. Bloomberg’s terminals and news service were making rapid inroads in the overseas market. In 1994-1995, Bloomberg installed its 10,000th terminal in Europe; reorganized its European news operation; unveiled an online trading service for its European subscribers; and created European Bloomberg Information in London to enable European audiences to view Bloomberg’s TV broadcast via satellite and cable systems. After opening bureaus in Johannesburg, South Africa, and Beijing, and with plans under way for a new bureau in India, by the end of 1995 the global network of Bloomberg Business News comprised 335 reporters in 56 bureaus.

In the United States, the contraction of the bond, derivatives, and mortgage markets in 1994 presented Bloomberg with the first drop in sales growth in its 12-year history. Instead of the 35 percent to 40 percent annual growth it had enjoyed through the summer of 1994, by the end of 1995 it had been forced to settle for a still enviable 25 percent pace. By 1995 Bloomberg had unveiled a new magazine called Bloomberg Personal, to be carried each Sunday as an insert in 18 U.S. papers around the nation. With an initial circulation of six million, it was the largest magazine launch in history. Bloomberg next launched Bloomberg Information Television, a 24-hour financial news service to be distributed by the direct-broadcast satellite company DirecTV. By early 1995, Bloomberg was wiring each of his 45,000 terminals for DirecTV satellite dishes so subscribers could access his new satellite news service through their Bloombergs. In 1995 Bloomberg launched a web site, which by the end of the year was offering a live audio feed of its radio broadcast. Moreover, Bloomberg told journalists that he planned to forge ahead with so-called on-demand audio and video features for his terminals, claiming “that’s the journalism story of the future.”

If Bloomberg had an Achilles heel it was that he had steadfastly refused to give up his terminal’s proprietary architecture for a more open, PC-based approach. As competitors like Reuters and Dow Jones began to allow subscribers to download data from their services to their own computers, however, Bloomberg began to inch toward a more relaxed policy, and in 1995 he introduced what he labeled the “Open Bloomberg.” Under this new system, subscribers would now be able to access Bloomberg’s data from any PC or Sun Microsystem workstation—but with significant conditions. The customer’s PCs— both those sending the data and those receiving—would each have to be connected to a Bloomberg terminal; subscribers would only be able to use Bloomberg’s proprietary data server, keyboard, and audio systems; and whereas news and data could be downloaded, Bloomberg’s raw data feed would remain safely off limits within the proprietary Bloomberg box.

“King of the Media”: 1996-1997

Bloomberg continued to insist that open data systems such as the Internet posed no real threat to his business, arguing that his value-added services, such as his securities-calculating analytics, would never be publicly available on the Internet. But competitors like Reuters and Dow Jones were allowing customers to use the entire raw data feed from their services in any way and on any platform they wished, and by 1996 Bloomberg was finding that only 25 percent of his customers were for Open Bloombergs. In late 1996, therefore, Bloomberg announced the “Bloomberg Data License,” which enabled his subscribers to gain direct access to the entire data portion of his raw feed in any amount they wished and for any use (except resale). Bloomberg’s prized analytics features would, however, remain strictly proprietary and unavailable for download. By spring 1997, Bloomberg’s business was evenly split: half his customers wanted to purchase his data for use through their PCs and half wanted the traditional Bloomberg terminal.

With 75,000 terminals installed by May 1997, Bloomberg introduced a flat-panel display monitor to reduce the amount of desk space required by its terminals, closed a deal with Lexis-Nexis to provide its news and market summaries to the database giant’s 750,000 subscribers, and partnered with Multex Systems to provide its subscribers with investment research reports via its terminal. In early 1996 Bloomberg announced its entry into yet another corner of the media industry with the unveiling of Bloomberg Press publishing and its two imprints, Bloomberg Personal Bookshelf (for consumers) and Bloomberg Professional Library (for financial workers). A year later it announced a venture with AT&T to make Bloomberg news and market information accessible to on-the-go commuters through AT&T “PocketNet” cell phones, which would contain a modem that would pick up a text-based version of Bloomberg’s data and display it on the phone’s small screen.

Meanwhile, Bloomberg Business News, rechristened Bloomberg News in 1997, had expanded to 70 news bureaus worldwide and was carried in more than 800 newspapers around the world, and Bloomberg Information Television was being distributed to more than 40 international affiliates. In 1996 Bloomberg admitted that his ultimate goal was a 24-hour local and international news service produced by local professionals around the world in each country’s local language. Even in its core business, leasing data terminals, Bloomberg was now resolutely global: almost half its business came from overseas. In late 1996 Bloomberg bought back one-third of Merrill Lynch’s 30 percent stake in his company for $200 million. To reporters he disclosed that although he had no intention of taking Bloomberg public he was considering starting a new financial newspaper in Great Britain and perhaps one day launching a cable news network when television became all-digital in the early 2000s. “The future belongs to multimedia, not one-product companies,” he told them. “I’m going to make sure that we’re one of those New Age companies.”