Reuters' coup in rival's backyard

INFORMATION giant Reuters is poised to scoop a $1bn (£670m) deal from arch-rival Bloomberg. It's a victory made all the more remarkable by the fact that the client awarding the contract is US investment giant Merrill Lynch, which has a huge stake in Bloomberg.

It is understood that Reuters has been told it has clinched the contract. All that is needed is clearance from the lawyers.

The deal is to supply Merrill with all the financial information and transaction systems it needs to provide a service for wealthy private clients who want to trade seriously on the stock market or in bonds and currencies. It will involve supplying about 27,000 investors with computer terminals that provide realtime financial news and data as well as systems support. The contract will run for five years.

Reuters has been competing for the business against Bloomberg, in which Merrill has a 20% stake, as well as the incumbent supplier, Thomson-ILX of Canada.

Reuters is thought to have won because in the arcane world of financial information it supplies the kind of products best-suited to Merrill's needs. One banker familiar with the deal said: 'If you think about this as a car deal, Merrill wants a delivery van, not a Mercedes-Benz; Bloomberg does not supply delivery vans.'

Price was crucial, according to Michael Nathanson, media specialist at Sanford Bernstein investment research in New York. 'The bank is looking to pay between $400 and $700 a screen and Bloomberg's system is just not going to hit the price points,' he said.

Some commentators suggest it is unlikely that Bloomberg will lose out entirely, if only because Merrill is its second-biggest shareholder. Company founder Michael Bloomberg, now Mayor of New York, owns about 70%. However, executives close to the bank insist: 'This is too big a deal to play favourites.'

A decision was expected on the deal in July but is now likely to emerge in a few weeks. None of the companies involved would comment.

Bloomberg and Reuters are global rivals in the financial information business. Jack McConville, analyst at New York information group Risk Waters, said Bloomberg received $2.6bn in revenues from its 163,400 terminals compared with Reuters, which received $2.65bn from 315,000 terminals.

Reuters claims it has about 560,000 terminals or 'accesses', but McConville said he counted only 'working' terminals used in transactions.

Both companies' performance is intimately linked to the state of the stock market. Reuters, which was worth more than £22bn just 18 months ago, is now worth about a quarter of that. Chief executive Tom Glocer has axed 2,250 jobs and in the six months to June, Reuters posted a pre-tax loss of £88m compared with a profit of £227m last year.

Bloomberg's financial health is more difficult to determine since it is a private and secretive company. However, Bloomberg is known to be planning to raise its prices by up to 5% from 1 November.