Microsoft to buy 4% of London Stock Exchange in 10-year platform deal

Microsoft said this morning it expects to pull in $5 billion in revenue from a deal with the London Stock Exchange Group (LSEG) to haul the British exchange operator's data platform into the cloud.

The agreement will see the American software behemoth buy 4 percent equity of LSEG itself from the Blackstone/Thomson Reuters Consortium as well as sorting the bourse's tech migration in the name of "a digital transformation approach underpinned by modern cloud and AI technology."

Microsoft will refurb "legacy platforms," let loose "siloed information" and unplug "limits on scale and data overload," or so it said in a statement this morning.

LSEG said the deal would increase the exchange's revenue growth "meaningfully over time as new products come on-stream," without putting a number on that. Microsoft, on the other hand, had that dollar value ready for the next earnings call and said it "estimates this partnership, and broader market opportunity, could generate an additional $5 billion in revenue for the company over the next 10 years, including the $2.8 billion minimum spend commitments from LSEG for cloud services and support."

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"The initial focus will be on delivering interoperability between LSEG Workspace and Microsoft Teams, Excel and PowerPoint with other Microsoft applications and a new version of LSEG's Workspace," Redmond said, confirming that Excel integration would be a part of this, and that City workers on LSEG's Workspace would henceforth be collaborating using Microsoft Teams.

"Customers will be able to create financial models, run data analytics and visualizations using LSEG content delivered in Excel and work seamlessly between LSEG Workspace and Microsoft 365."

The LSE said total incremental cash costs over 2023-2025 for the group were expected to be in the range of "£250-300 million, including around £100 million in capex and a 50-100 basis points impact on EBITDA margin over the same period."

In its own statement, LSEG also confirmed the contractual commitment for minimum cloud-related spend with Microsoft of $2.8 billion (£2.3 billion) over the term of the partnership, saying "additional spend with Microsoft will be driven by the success of the strategic partnership."

David Schwimmer – CEO of LSEG, not the Friends actor – said of the deal: "This strategic partnership is a significant milestone on LSEG's journey towards becoming the leading global financial markets infrastructure and data business, and will transform the experience for our customers."

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The bourse also confirmed that co-inventor of ASP.NET Scott Guthrie, an exec veep in Microsoft's Cloud and AI Group, will soon be a non-executive director of LSEG, subject to the "appropriate approvals."

Last month, Guthrie said the challenging economy wasn't hitting the software giant on all fronts: "I've not seen the current situation cause people to pause cloud spending," the cloud exec told CNBC.

Microsoft recently made round of job cuts – thought to be under 1,000 – to keep costs down as the biggest technology companies shore up resources to mitigate impending global economic pain.

Analysts at TMV noted that in 2021, LSEG spent $27 billion to acquire market data purveyor Refinitiv, which provides analytics and financial data to more than 40,000 clients globally.

It added: "In May 2022, they also acquired US financial markets data specialist MayStreet which combines ultra-low latency software with cloud technology, to provide real-time access to comprehensive global market data... The LSEG has been looking to differentiate itself in the market with an end-to-end proposition across trading, execution, data and analytics solutions." ®