Lotus Eyes Sale Of Signal Quote Business; Reuters Kicks Tires, But Backs Away

Talks between Lotus Development Corp. and Reuters Holdings PLC on the possible sale of Lotus's quote distribution business have broken off. Sources say, however, that Lotus is still inclined to exit the network and ticker plant business in order to focus on its software for processing real-time financial information.

"There was a level of interest and there is no longer a level of interest" in Reuters acquiring Lotus Information Network Corp., says John Hull, senior marketing executive at Reuters North America. Hull doesn't elaborate, and Charles Digate, senior vice president at Lotus, declines comment.

Lotus is "looking at the real-time quotation business as two businesses, not one," says a source close to the company. "One business is the network with the ticker plant and broadcast and all the ingredients that go along with that, and the other is the software that goes on the PC end." The firm is "looking for the best ways of taking advantage of those capabilities, not necessarily jointly," says the source.

While Lotus appears by no means desperate to dispose of LINC, its willingness to consider selling a business it acquired less than two years ago (MTR, October 1985) reflects four factors:

(1) The Signal product didn't take off as expected. Selling quotes is unlikely ever to be a major profit center for Lotus.

(2) Lotus's new chief, Jim Manzi, is said to favor a back-to-basics approach, and running networks and ticker plants is pretty far removed from Lotus's core software business.

(3) Many don't consider Lotus's data feed to be of professional caliber, a fact that Lotus may not have fully understood at the time of the Dataspeed acquisition.

(4) The company would like to make its next generation of quote processing software compatible with many data feeds, which is tough to do while it remains a quote vendor itself.

Lotus is expected to release its new financial information software, "Casino" (MTR, September 1986), within the next two months, possibly in conjunction with the Mid-May Securities Industry Association Information Management Conference. Sources say there's no connection between the timing of the Casino release and the discussions with Reuters.

Lotus's Signal network is technically between a rock and a hard place, a fact which may have contributed to Reuters's hesitancy. The 13-city FM sideband network needs a multimillion-dollar upgrade to support the kind of professional financial applications Casino is designed for. Lotus is understandably reluctant to invest in this upgrade itself, especially if the network may be sold. Prospective buyers, on the other hand, are unlikely to pay a premium price for a network that will need a substantial investment immediately.

Reuters's interest in LINC isn't clear, but it is known to have been following the business closely. Reuters had even looked seriously at Dataspeed before Lotus bought it. Two possibilities stand out. First, Reuters is quite interested in portable, hand-held quote terminals, like Lotus's Quotrek. It had almost 3,000 customers for hand-held services overseas in 1986, compared with less than 1,300 in 1985. Second, Reuters wants to establish an FM sideband broadcast capability in the U.S., which LINC would have provided.

Although the future of its quote delivery business may be up in the air, Lotus is clearly committed to the software end. Its Casino release, sources say, will fix several of the drawbacks inherent in trying to marry off-the-shelf spreadsheet software with real-time market data. For one thing, the Casino spreadsheet, while remaining 1-2-3 compatible, is expected to be driven directly by the quote feed, thereby eliminating the need to poll the Signal receiver for updates.

Casino is also expected to permit integration of fundamental and historical data from the CD-ROM Onesource product with incoming real-time information. The engine driving the product is said to be derived from Metro, Lotus's new multitasking desktop organizer. Users will be able to store and process quotes in background while running other applications in foreground, sources say.

If Lotus manages to divest its network and returns to being "just" a software company, it could create serious repercussions in the third-party quote software community. Many small third-party broker book and analytic software firms have been working closely with Lotus to make their programs compatible with the Signal feed. Having thus learned many of their tricks, Lotus may now be in a position to turn around and compete with them.