New York: Wall Street firms led by Goldman Sachs are close to buying a stake in chat and instant messaging startup Perzo in pursuit of an alternative to a similar application from Bloomberg LP, sources familiar with Goldman's plans said.
Banks are trying to cut costs as sluggish trading volumes and higher regulation weigh on revenues. Bloomberg has dominated messaging on Wall Street for years, but its application is part of a data, trading and news terminal that costs about $20,000 a year. The Perzo applications are free.
Several banks and asset managers are considering an investment in Perzo, including Morgan Stanley, JPMorgan Chase, Bank of America, Deutsche Bank, HSBC, BlackRock and the hedge fund Maverick Capital, said two sources briefed on the matter who declined to comment publicly.
The firms, which have received term sheets for the deal and signed non-disclosure agreements in recent days, either declined to comment or did not respond to requests for comment in time for publication.
Goldman Sachs spokespeople declined to comment on its Perzo investment, its plans to develop a chat program or its use of Bloomberg terminals. Bloomberg declined to comment for this story.
Perzo is a Palo Alto, California-based startup founded by David Gurle, who declined a request for comment. Perzo's application differs from Bloomberg's in that it is 'open-source', meaning customers can plug it into their systems and alter it as they see fit, whereas Bloomberg customers have to buy the entire terminal, and can't just buy the messaging system and adapt it.
Banks have been looking for messaging alternatives to Bloomberg's closed system for years and have had limited success because the Bloomberg system is used by so many on Wall Street.
One source compared Bloomberg to Blackberry, whose product dominated the smart phone market until Apple came out with its iPhone. Thomson Reuters, which competes with Bloomberg in news, data and analytics, has a chat system with more than 200,000 users in its directory, compared with Bloomberg's 320,000.
Open messaging network
Thomson Reuters has also collaborated with price data provider Markit and banks including Goldman Sachs to create an open messaging network. Goldman Sachs spokespeople declined to comment on its use of Thomson Reuters terminals. Reuters spokespeople declined to comment.
It's unclear what effect a successful new messaging system might have on Goldman's orders for Bloomberg terminals, or whether Goldman would use Bloomberg's messaging system alongside the new application.
"Bloomberg is a very tough ecosystem to break," said Jefferies analyst Dan Dolev. "People say it is the most expensive social network system in the world." Bloomberg's rise began in the 1980s when it became a prime source for data and analytics about bonds.
Messaging applications play a critical role in the daily functioning of Wall Street. An underwriter will use messaging programmes to tell investors where a bond has priced. Hedge fund managers use messaging applications to talk about trading ideas.