FactSet Research Systems Inc.



601 Merritt 7
Norwalk, Connecticut 06851
U.S.A.
Telephone: (203) 810-1000
Fax: (203) 810-1001
Web site: http://www.facset.com

Public Company
Incorporated: 1978 as FactSet Research Corporation
Employees: 1,000
Sales: $251.9 million (2004)
Stock Exchanges: New York
Ticker Symbol: FDS
NAIC: 518111 Internet Service Providers

FactSet Research Systems Inc. is a Norwalk, Connecticut-based company that provides global financial and economic information and analytics, combining more than 200 databases into a single source—covering stock markets, company data, government information, and outside research, as well as proprietary material. The information is delivered online from mainframe computers to the desktop PCs of a select roster of 1,400 institutional subscribers able to afford the pricey service, such as investment managers, wealth managers, investment bankers, law firms, and corporations. FactSet also provides tools and training to allow customers to manipulate the data for analysis and reports. Only a small portion of the business is content, about 10 percent, but in recent years the company has attempted to move beyond its delivery model by acquiring several niche content providers, thus transforming FactSet from a financial data integrator into a solution provider. In addition to its Connecticut headquarters, FactSet maintains operations in New Hampshire, Virginia, Europe, and the Pacific Rim. FactSet is a public company listed on the New York Stock Exchange.

Launching the Company in the Late 1970s

The company was founded in September 1978 as FactSet Research Corporation by Howard E. Wille and Charles J. Snyder, both Wall Street veterans. Wille, the older of the pair, had worked as an analyst and investment manager at a number of firms before becoming the president and chief investment officer at Piedmont Advisory Corporation from 1961 to 1976. He then became a partner and director of research at the New York investment firm of Faulkner, Dawkins & Sullivan, Inc., where he remained until 1977, at which point Shearson Hayden Stone, Inc. acquired the company. Wille stayed on as a manager until deciding to strike out on his own to launch FactSet and become its chief executive officer. Some 14 years younger, Snyder, a self-described "math and science guy," was more technically savvy than Wille. After earning an undergraduate degree from Princeton and a master's degree from New York University, he also worked at Faulkner, Dawkins, from 1964 to 1977, becoming the director of computer research, a position he retained when Shearson took over. "I found the work wasn't much fun anymore," he recalled in an interview he granted to his prep school, Western Reserve Academy, for a fundraising program. He decided to team up with Wille, "took a real deep breath … and jumped out the window." He became FactSet's chief technology officer and Wille focused on selling. In a move that hearkened back to another era, the company did not sign contracts with clients, electing instead to do business on a handshake basis, a policy that became entrenched at FactSet.

At the time Wille and Snyder set up shop in Manhattan, computer financial analysis was still very much in the early stages, relegated to the world of bulky mainframe computers, requiring scores of technicians to simply merge different sets of data. Many analysts and fund managers continued just to use paper. FactSet was a forward-looking venture, established to harness the emerging technologies—personal computers, spreadsheets, and user-friendly databases—to bring together data from a number of sources, deliver it to users, and provide them with the tools to slice and dice and, ultimately, make a useful report out of the material. After more than two years of research and development, FactSet had a product ready for its selective market. In 1981 the company released its first client terminal, which connected a subscriber to FactSet's mainframe computers and allowed it to use the Company FactSet report. As Snyder described it to Western Reserve Academy, "We got the data from a wide variety of sources and integrated it so that our clients could get complete portfolio data at the push of a button " In essence, FactSet was a pioneering online service, many years before most people had ever heard of the Internet, and well before the invention of the browser and the World Wide Web. To build up a customer base, the company concentrated on service. "We built service in as part of our product," Snyder explained to his prep school, "and it was a clever strategy. We'd make house calls, give help over the phone, or teach a class. Computers are a great self-teaching tool, but they can also be frustrating. We found that people would use our product when they knew how."

Continual Upgrades in the 1990s

For the next quarter-century, the bulk of the company's history revolved around the improvements Snyder and his team of computer scientists made to the original product. With the rise of the personal computer in the late 1970s came new spreadsheet applications. However limited in power and capacity, they at least allowed users to store some information and manipulate it. In 1982, in order to better serve customers, Snyder did some reverse engineering on VisiCalc, the first in a generation of spreadsheets, and developed a way that FactSet databases could directly populate the cells of a subscriber's spreadsheet. The product, Data Downloading, was revolutionary in the way it allowed users to blend personal data with FactSet's mainframe databases for more robust analysis and financial modeling. It would remain a key component of the FactSet service 20 years later. In 1983 the company made this feature available to Lotus 1-2-3, which was eclipsing VisiCalc in spreadsheet popularity. Another major improvement in the 1980s was the 1984 addition of screen capabilities, although users were still limited in their range of search items. This deficiency was corrected later in the decade with the introduction of Universal Screen, which permitted users to establish their own screening criteria. Along the way, FactSet increased the speed of delivery, in 1988 adopting the use of 9600 modems, quaint in terms of broadband hundreds of times faster a decade later, but an impressive improvement at the time. Another important development during the 1980s was the 1989 release of the company's Private Database Service. Users could now store proprietary data and integrate it with their own information to perform custom analysis.

FactSet opened the 1990s by relocating its headquarters from New York City to Greenwich, Connecticut, although it continued to maintain a Manhattan computer center. The product also continued to be upgraded. In the early part of the decade real-time earnings estimates databases were included, as was the first non-U.S. data. An application called Alpha Testing was launched, permitting users to compare a number of variables and to project investment returns over time. Other enhancements during this period were the introduction of IB link and Comp Builder for investment bankers, and the release of the first benchmark. In 1991 FactSet was made available on the increasingly popular Windows platform. The company provided WAN (wide area network) connectivity in 1993, followed later in the decade with WAN connectivity via the Internet. In addition, the company established client bases in new markets, Europe in 1991 and the Pacific Rim in 1992. To support the European business, FactSet opened a London office in 1993 as well as one in San Mateo. A Tokyo office opened in 1995.

By the end of 1995 FactSet had less than 400 customers, but they included 84 of the United States' top investment managers. The company recorded sales of $36.2 million in 1995 and net income of nearly $5 million. The company also changed its name in June 1995, becoming FactSet Research Systems Inc. in preparation for becoming a public company. Although an initial public offering of stock was completed in 1996, there were no new shares issued; thus FactSet received no proceeds. Nevertheless, the company did not lack for funds, holding $12.7 million in cash and short-term investments, and generated more than sufficient cash flow to pay for the major upgrades the company made in 1996 to its two computer centers, located in Greenwich and New York City (each of which ran at 50 percent capacity in order to provide backup capabilities should one experience shutdown). FactSet continued strong growth through the rest of the 1990s. Starting in 1993 sales grew at an annual rate of 20 percent; the same pace was maintained by earnings starting in 1996.

A key to retaining customers and attracting new business was the introduction of new features to the FactSet product. In 1996 the company released Portfolio Management Workstation, empowering global portfolio managers with a host of specialized tools. A year later the Economic Analysis application was unveiled to permit customers to portray big picture information in the form of charts and reports. Also in 1997 FactSet became more user-friendly with the launch of Company Explorer. Now subscribers could access a wide range of company data from a single window. The product became even easier to use in 1998 with the release of the DIRECTIONS interface and the addition of Online Assistant, a web-based help and reference tool. Moreover, the company improved client service with the introduction of 24-hour live telephone support.

Expansion also continued in the second half of the 1990s. Offices in Hong Kong and Sydney, Australia, were opened in 1998. In that same year the New York data center was expanded and a dedicated training center was opened. In 1999 a Boston office and training center also was added.

Company Perspectives:

In 1978 FactSet was founded with a vision that we could deliver financial data directly to clients with tools that would increase their productivity and make their jobs easier.

Management Changes Near End of 1990s

The end of the 1990s and start of a new century also brought a changing of the guard at FactSet. First, Snyder retired as president and chief technology officer in August 1999, staying on as vice-chairman as well as a consultant to help the technical groups make the transition. But after Wille retired as CEO and chairman in May 2000, Snyder stepped in as CEO on an interim basis, serving until September of that year, when Philip A. Hadley was named the new CEO and chairman. The driving force behind the company in recent years, Hadley, an accounting graduate from the University of Iowa, had joined FactSet in 1985 as a consultant after working for Cargill Corporation. A year later he became vice-president of sales, then in 1989 became senior vice-president and director of sales and marketing, a post he held until ascending to the top of the organization. He took over a company with 764 clients and more than 25,000 users, generating $103.8 million in sales and $18.6 million in earnings in 1999.

FactSet advanced on a number of fronts in the early 2000s, especially in terms of incorporating the Web into its operations. First, the technical infrastructure was upgraded to power client web sites, then necessary products for a web environment were identified and development efforts launched. Of more importance, perhaps, the company decided that the next generation of all applications had to be Web-enabled. The integration of the Internet gave FactSet access to a new source of customers. New products in the early 2000s included a portfolio returns product, SPAR (Style, Performance and Risk), that allowed portfolio managers to analyze the risks and performance of their own funds as well as compare them with peer funds; the Data Central application, which allowed subscribers to create and save their own time-series databases; FactSet Marquee, which combined streaming news and stock quotes with traditional security-level analysis; and Public Information Book Builder, to allow users to quickly assemble reports and news stories into a PDF document.

FactSet also expanded its physical operations during this period, buying a 12,500-square-foot New Hampshire data center from bankrupt Vitts Network Inc. to replace the New York data center. Later, the company purchased a data center in Reston, Virginia, an area that had seen a great deal of buildup in the 1990s before the dot-com bust. FactSet was able to take advantage of available state-of-the-art data center space in Virginia to open a new facility that could house some of the company's Greenwich, Connecticut computer operations. In this way, the company gained geographic diversity, an important factor in a post-9/11 world. The company also would move its headquarters from Greenwich, relocating to larger accommodations in nearby Norwalk in 2004. In addition, FactSet opened an office and training facility in Chicago and new international offices in Frankfurt, Paris, and Milan.

After being in business for more than 20 years, FactSet completed its first acquisition in 2000, paying close to $10 million for Innovative Systems Techniques, Inc., picking up the Vision Technology database management product, thus providing subscribers with advanced data analysis tools. This purchase was the start of a number of niche acquisitions intended to flesh out FactSet's offerings in a bid to shift the company from a financial data integrator to a solution provider. FactSet also began adding content such as the acquisition of LionShares, bought for $2.3 million from Worldly Information Network Inc. LionShares was a share ownership database geared toward the institutional and mutual fund markets, allowing fund holdings to be compared for analysis and business development purposes. Later niche content acquisitions included Mergerstate Holdings L.P., a 40-year-old provider of mergers and acquisitions information; CallStreet, which provided transcripts of quarterly conference calls; and TrueCourse, compiler of corporate takeover defense intelligence. FactSet also expanded its European business by acquiring the JFC Group of companies for $60.4 million in 2004. Based in both London and Paris, JFC provided institutional investors with global broker estimates and other financial and macroeconomic data.

Despite difficult economic conditions, FactSet continued its strong pattern of growth in the first half of the 2000s. Sales topped the $200 million mark for the first time in 2002 and approached $252 million in 2004, when the company also posted net income of $58 million. A sterling reputation, as evidenced by its 96 percent customer retention rate, new state-of-the-art facilities, a strong balance sheet, and recent acquisitions that brought key personnel as well as new product offerings, boded well for the future of FactSet.

Principal Subsidiaries

Factset Data Systems, Inc.; FactSet Mergerstat, LLC; Call-Street, LLC; Innovative Systems Techniques, Inc.

Principal Competitors

Bloomberg L.P.; Reuters Group PLC; The Thomson Corporation.

Key Dates:

1978:
The company is founded in New York City by Howard Wille and Charles Snyder.
1981:
The first client terminal is released.
1983:
Spreadsheets are enabled to receive mainframe computer data.
1991:
FactSet is made compatible with the Windows environment.
1996:
The company is taken public.
2000:
Philip Hadley succeeds the retiring founders as CEO and chairman.
2002:
Sales top $200 million.
2004:
Headquarters are moved to Norwalk, Connecticut.

Further Reading

Alva, Marilyn, "A Little Known Player with Big-Time Result," Investor's Business Daily , May 9, 2003, p. A08.

——, "Provider of Investment Research Data Keeps Taking It to the Street," Investor's Business Daily , January 31, 2005, p. A05.

Fishman-Lapin, Julie, "FactSet Research Systems Moves Data Center from Connecticut to Virginia," Stamford Advocate , February 18, 2004.

Reeves, Amy, "Despite Ailing Market, Data Provider Thrives," Investor's Business Daily , April 26, 2002, p. A06.

"Snyder Gift Is Largest in the School's History," Western Reserve Academy Campaign Update , Winter 2004.

Tewary, Amrit, "FactSet's Numbers Add Up," Business Week Online , January 22, 2003.

Watkins, Steve, "Data Firm Finds Value in Old-School Ways," Investor's Business Daily , December 21, 2000, p. A12.

—Ed Dinger



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