Mayor of New York Michael
Bloomberg delivers Keynote Address at Five Borough Chamber
of Commerce's Inaugural New York City Xpo for Business, Nov
Founder of Bloomberg LP
Michael R. Bloomberg is the 108th Mayor of the City of New York. He was
born on February 14, 1942 and raised in Medford, Massachusetts, where
his father was the bookkeeper at a local dairy. Mayor Bloomberg's thirst
for information and fascination with technology was evident at an early
age, and led him to Johns Hopkins University, where he parked cars and
took out loans to finance his education. After his college graduation,
he gained an MBA from Harvard and in the summer of 1966, he was hired by
Salomon Brothers to work on Wall Street.
He quickly advanced through
the ranks, and became a partner in 1972. Soon after, he was supervising
all of Salomon's stock trading, sales and later, its information
systems. He was fired in 1981 after another company acquired Salomon.
Michael Bloomberg used his stake from the Salomon sale to start his own
company, an endeavor that would revolutionize the way that Wall Street
does business. As a young trader, he had been amazed at the archaic
nature in which information was stored. When he needed to see how a
stock had been trading three weeks ago, he had to find a copy of the
Wall Street Journal from the date in question, and the records system
consisted of clerks penciling trades in oversize ledgers. So, he created
a financial information computer that would collect and analyze
different combinations of past and present securities data and deliver
it immediately to the user.
As the business proved its
viability, the company branched out and in 1990 Bloomberg LP entered the
media business, launching a news service, and then radio, television,
Internet, and publishing operations.
Bloomberg LP is a private
company and is not required to publicly report its earnings, making it
impossible to determine its exact value. But the company's revenue
streams are relatively easy to follow.
In Nov 2006, The New York Sun reported that the company derives most of
its profits from its famed terminals, which sit atop the desks of
thousands of traders, investment bankers, and financial analysts across
In 1982, Bloomberg L.P. sold
20 subscriptions to its service; 25 years on, Bloomberg LP has
continues going through a huge growth
spurt. In 1995, it had 52,000 terminals. By 2001, the number shot up to
156,000 terminals. Last year a New York Times story estimated the number
at more than 200,000. And in November, a spokeswoman for the
company, Judith Czelusniak, said the company has about 260,000 terminals
and almost 300,000 users.
The New York Sun says that
at a rate of $1,425 a month, the machines bring in more than $4.4
billion a year (the company is known for its no discount policy even
when leasing a single company hundreds of machines). That revenue
estimate dwarfs companies such as the New York Times Co., which had 2005
revenues of $3.4 billion, and the publisher of the Wall Street Journal,
Dow Jones, which had 2005 revenue of $1.8 billion. Bloomberg's costs are
lower than newspapers because its product is distributed over the
Internet. There is no need for newsprint, presses, or delivery trucks.
The newspaper says that in
2001, Business Week reported that Bloomberg had a 20% profit margin.
Given the double-digit growth of the company in the years since and the
spike in the number of terminals it leases, that margin is likely to be
at least 35% and could be higher. The high fixed costs of the business
mean the company increases its profits as sales take off. According to a
Forbes list of America's largest private companies, Bloomberg LP saw a
13% increase in revenue in 2005.
The 35% margin would dictate
$2.9 billion in expenses for everything from Bloomberg's 9,000 employees
to its rent to its electrical bills and equipment. It means the company
is netting at least $1.5 billion a year pre-tax, making Mr. Bloomberg's
annual pre-tax income more than $1 billion. That is, of course, in
addition to the symbolic $1 a year he accepts from his job as mayor. How
much would that cash flow be worth to a buyer? Businesses with good
growth and dominant market position can be valued at 15 times their
pre-tax earnings. Using that multiple, Bloomberg LP's $1.5 billion of
pre-tax income makes the company worth $22.5 billion. And if the
companies operating margins are higher, as some suspect, the company and
the mayor's wealth, could be materially greater. If the company is worth
$22.5 billion, the mayor's stake would be $16.2 billion.
Schwarzenegger and New York Mayor Michael Bloomberg campaign for new
technology to fight global warming:
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