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DIGITAL DOUG: Online Investing

E*TRADE on the Expansion Highway

05/21/2001

West Coast wildcats E*TRADE announced today that they are snapping up online brokerage Web Street Securities for approximately $45 million worth of E*TRADE Group's depressed stock. Chicago-based Web Street is a small but respected online firm founded in 1996.

As part of the deal, E*TRADE gets Web Street's 34,000 active accounts, and also acquires Web Street's physical locations in San Francisco, Boston, Beverly Hills and Denver. These offices will be converted into E*TRADE financial superstores, called E*TRADE Centers, similar to the Center opened on Madison Avenue in New York in April 2001.

While it's too early to know how Web Street's customers will be handled in the acquisition, chances are they'll come out on the losing end of the deal. Web Street customers currently pay a $14.95 minimum commission on all online stock trades, and receive commission-free trades on NASDAQ stock trades of 1,000 shares or more. E*TRADE charges $14.95 for listed stock trades, but bumps the minimum commission up to $19.95 for Nasdaq trades as well as limit and stop orders. Of course, E*TRADE offers a wider array of products and services, so Web Streeters may well be willing to pay more.

The deal is subject to federal regulatory approval, as well as approval by shareholders of both companies.

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