Exclusive - Goldman leads investment by Wall Street in new communications platform

NEW YORK (Reuters) - After spending two years developing a wide-ranging communications tool for Wall Street, Goldman Sachs Group Inc says it has reached the perfect pitch.

    On Wednesday, Goldman and 13 partners plan to announce a $66 million investment in a new company called Symphony Communication Services Holdings LLC, according to a draft press release viewed by Reuters. The partners are all financial services firms, including major global banks and asset managers.

    Symphony, led by chat industry veteran David Gurle, will allow financial firms, corporate customers and individuals to put all of their digital communications on one centralized platform. Chat messages, texts, emails and tweets will no longer have to exist in separate silos.

    The platform is "open source" ? meaning its users can take the code inside the guts of the technology and alter it for their unique needs. They can add "widgets" for areas like trading, research and internal data.

    "We recognized that messaging was a complex problem to solve in our industry," Darren Cohen, global co-head of principal strategic investments at Goldman Sachs, said in a joint interview with Gurle this week. "It's the core nervous system of the financial markets, but there are information silos that don't speak to each other. So, we started to think strategically about creating one platform that allowed the silos to communicate effectively, and then taking that platform to clients and external users."

    Symphony represents a threat to existing data and communications networks on Wall Street, including those run by Bloomberg LP, Thomson Reuters Corp and Markit Ltd. Thomson and Markit have also been jointly developing an "open-source" chat platform together. It is unclear how widely Symphony will be adopted, though Goldman already has about 23,000 employees using the system internally, exchanging millions of messages each week.

The Goldman-Gurle partnership has been widely seen as an attempt to upend Bloomberg's messaging and chat platform, known as Instant Bloomberg, which is widely used on Wall Street. Some also view the project as an extension of the battle between Bloomberg and Goldman Sachs last year when the bank was upset to discover that Bloomberg reporters had access to client information, such as when their employees were logged into terminals. Bloomberg subsequently removed such access.

But sources involved with the investment and Goldman employees who have used Symphony say it is more than a simple chat or messaging program, and that the partnership was not conceived in retaliation to what became known as the Bloomberg "spying" scandal. Goldman's technology team, led by Chief Information Officer R. Martin Chavez, has been working on the idea for years, these people said.

The companies did not disclose the specific size of individual investments in Symphony. It is unclear whether Goldman?s stake is higher than the other 13 investors or how much Gurle, any other early-stage investors, and employees at his Palo Alto-based startup, Perzo Inc, will own. Perzo will cease to exist and its business will be folded into Symphony's as a result of the deal.

Symphony will charge large customers a monthly fee, depending on their need for data storage and infrastructure. Individuals will not have to pay, but will get the same protections as corporate users, Gurle said.

    It plans to launch a beta version for corporate customers in early 2015, and will open the system more widely next summer.

GOLDMAN APPROACHED GURLE

    The project, first disclosed by Reuters in August, represents a combination of proprietary platforms that engineers at Goldman Sachs and at Gurle's Perzo had been working on separately since 2012.

    While both parties had a similar goal of putting various types of communications onto the same platform, each had specific strengths that, if combined, had the potential to be widely adopted.

    Goldman's technology factored in a range of compliance and best-practices needs for large financial services firms, including information barriers to protect sensitive information and the ability to surveil, retain and retrieve messages.

But whereas Goldman's technology was hosted on its own servers, Perzo's technology was cloud-based, which made it less expensive to distribute widely. Gurle had also developed a multi-layer encryption tool to protect sensitive data stored in the cloud by various users.

    Cohen approached Gurle about a year ago to find out whether he was interested in combining forces. During his career, Gurle, a native of France, has developed now-widely-used chat systems for Microsoft Corp, Thomson Reuters and Skype, which is now owned by Microsoft. His experience gave him a keen sense for what financial and corporate customers needed.

After looking at Goldman's platform, Gurle agreed to partner with the bank. One critical decision was to make Symphony an open-source platform, allowing users to customize it to their individual needs.

    "This is really where the value I've been working on over the last 20 years on messaging comes together," Gurle said. "You need to make sure that (information) arrives in a way that its integrity, its privacy and its timeliness are never in question."

    Gurle and Cohen initially decided to target five other financial firms to contribute capital and partner on their project. But after Reuters reported on the investment in August, Goldman and Perzo received more than 5,000 calls from companies interested in joining them.

    Ultimately they narrowed down the list to 13 additional partners. They are Bank of America Corp, Bank of New York Mellon Corp, BlackRock Inc, Citadel, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, Jefferies Group LLC, JPMorgan Chase & Co, Maverick Capital Ltd, Morgan Stanley, Nomura Holdings Inc and Wells Fargo & Co.

(Reporting by Lauren Tara LaCapra; Editing by Martin Howell)

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