Under the terms of the new commercial agreement, TIBCO will have immediate access to the financial services market, except that TIBCO will not be able to market or sell Risk Management applications and Market Data Systems for financial services companies. Reuters will continue to use TIBCO technology internally and embedded within its products. Reuters will, however, phase out its role as a general reseller of TIBCO products over the next 18 months. Reuters and TIBCO will work together with Reuters existing customers to ensure a smooth migration of maintenance contracts to TIBCO. Until its reseller rights are phased out in March 2005, Reuters will continue to make quarterly payments of US$5 million to TIBCO. The quarterly payment amount is subject to reduction during the phase-out period based on TIBCO's direct revenues from products and support sold to financial services customers.
These actions by Reuters are consistent with previously announced plans to slim down and re-focus its software solutions business as part of its Fast Forward transformation plan. This new agreement also provides TIBCO with an opportunity to better leverage its core strength to service the finance industry directly.
Consistent with these new arrangements, Reuters intends to reduce its 49% shareholding in TIBCO. TIBCO has agreed to file a registration statement with the SEC to facilitate public sales by Reuters of a portion of its stake. Any sale and its timing will depend on market conditions. If Reuters completes a single registered public sale of at least US$100 million of TIBCO shares within 12 months of the filing, TIBCO has committed to repurchase an equal number of shares from Reuters at the same price per share, up to a maximum of US$115 million.
Tom Glocer, CEO of Reuters, said: "In February we announced that we would refocus our Solutions business as part of our Fast Forward programme. The agreement we have now reached with TIBCO ensures Reuters continuing exclusive rights in the markets where we have chosen to remain, specifically Market Data Systems and Risk Management. It also allows TIBCO early access to the rest of the financial services market, which benefits all TIBCO shareholders including us. In addition, TIBCO has agreed to make a portion of its cash available to assist an orderly sale of Reuters stake."
Vivek RanadivÃ©, CEO of TIBCO, said: "We've had a long and productive relationship with Reuters and continue to view Reuters as a strategic partner. With this next step in the relationship, TIBCO will now have the ability to fully capitalize on our brand strength in financial services. We look forward to expanding the use of TIBCO technology with both new and existing customers in financial services."