E*Trade Continues Move Towards 'Bricks & Clicks'

by Philip Morton, InvestorsOffshore.com

23 May 2001

E*Trade, the US online broking giant, announced this week that it will acquire a smaller online brokerage, Web Street Securities, a move which analysts are saying could be the start of consolidation among smaller players in the online brokerage business. E*Trade will acquire Web Street Inc, the parent company of Web Street Securities, for US$45m in stock.

Web Street has 34,000 active accounts, including 6,300 accounts held by German residents, and also has physical locations in San Francisco, Boston, Beverly Hills and Denver, which will be converted into E*Trade financial superstores, called E*Trade Centres, which the company has developed a liking for of late.

Web Street Securities, which has its headquarters in Chicago, serves individual investors, primarily in the United States and Europe. Its services include delivering streaming, real-time quotes, quick trade confirmations and real-time portfolio updates, along with 24-hour customer service.

Christos M Cotsakos, chairman of the board and chief executive officer of E*Trade Group, said in a statement: 'Today's acquisition of Web Street further demonstrates the strength of the E*Trade brand and its agility to seize opportunities that make strategic sense for its shareowners, customers and Associates. As we continue to expand our diverse revenue streams and increase our worldwide customer base, E*Trade further strengthens its leadership position.'

Joseph Fox, co-chairman & co-chief executive officer of Web Street, added: 'We believe that Web Street's customers will realize tremendous benefit from this synergistic combination of two leading innovators in the online financial services business. Web Street and E*Trade share a common vision of providing global brokerage services to our valued customers through face-to-face, as well as electronic channels. Web Street's brokerage customers will benefit from E*Trade's impressive array of banking and investing products, while still receiving a high level of customer service that they have come to expect.'

Richard Repetto, chief financial analyst and senior vice president with Putnam Lovell Securities Inc, told the US press that the purchase of Web Street Securities was indicative of the current situation in the online broking industry, whereby the larger brokers are keen to expand their subscriber base and are picking up smaller brokers that have hit upon hard times due to the technology shake-out and a downturn in investors' online activity. He said: 'It's definitely an indicator of the consolidation move but more of a confirmation that the smaller guys are more apt to go and succumb to market pressures and the negative environment. I don't think it means a tremendous amount for the larger guys. It doesn't mean Schwab, Ameritrade and E*Trade are going to be bought.'

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