E-Trade wants its good name back. The online trading company, which since 1998 has licensed out the E-Trade brand to a string of international licensees, is bringing those ventures back into the fold. Industry watchers say the licensees weren't as aggressive as the parent company, and are now seeing their autonomy evaporate as E-Trade tries to develop the first global online trading network.
To facilitate its international consolidation effort, E-Trade has purchased outright its joint ventures covering most of Europe. The latest was the Jan. 13 acquisition of E-Trade UK, which was owned jointly by E-Trade and its British partner, Electronic Share Information, an online provider of financial data such as real-time stock quotes. E-Trade paid $104 million to take control of the joint venture. The company's first move following the purchase was to depose CEO Julian Costley, who had also been head of ESI.
The strategy is something of a reversal for E-Trade, whose international plan had been to develop local partnerships in new countries. The partners E-Trade chose already had strong traffic figures in their local markets, meaning E-Trade didn't have to work too hard to earn credibility straight off. The company was able to offer prepackaged technology that made it easy for the mini-E-Trades to get up and running quickly.
"The rationale of having local partners is still very valid," says Salomon Smith Barney analyst Matt Vetto. But after establishing a beachhead, he says, E-Trade found its partners moving slower than it would have liked. "As aggressive a company as E-Trade is, that's a problem."
In bringing the regional E-Trades back into the fold, the company ultimately hopes to create a 24-hour global trading site, where stocks can be exchanged in all currencies at all times. Investors in many countries want access to foreign markets, notably the lucrative U.S. stock markets. At the moment, there is no single company that can let people in any country trade stocks on all public markets.
Judy Balint, E-Trade's chief international officer, says that moving to a consolidated model isn't so much a change of strategy as an evolution.
"In this Internet space, things are flying," says Balint. "What was appropriate to be doing five or six months ago is not the appropriate thing to be doing today."
It's unclear what, if any, role former E-Trade UK CEO Julian Costley will play in the newly acquired company. But his replacement, James Marler, says Costley will stay on in the near term to aid in the transition. Marler was formerly a managing director of TIR Securities, a London-based multicurrency clearinghouse for trades that was acquired by E-Trade in July 1999.
Marler says his first moves will be to strengthen the brand and to figure out its role in the global trading structure. "The strategy now being put in place at E-Trade is to develop the brand here in the U.K. and develop the online trading of international stocks," Marler says. "But the internationalization of the U.K. operations is [priority] No. 1."
E-Trade is not acquiring all of its international ventures, however. While the company has bought back sites covering the U.K., Belgium, the Netherlands, Luxembourg, Austria, Italy, France and Sweden, E-Trade has left intact its joint-venture agreements in Australia, Japan, Germany and South Africa.
Balint says the company has no plans to buy back E-Trade Japan, a joint venture with Softbank. Softbank has invested more than $400 million in E-Trade ventures.
E-Trade Australia remains similarly elusive. The company went public on the Australian market last year, and Balint said acquiring that license would be "extremely expensive."