ATM Deal Doesn’t Preclude E*Trade Merger

Who knows what to make of the rumors that online broker E*Trade Group is actively seeking a merger with a financial institution, with names like American Express and Goldman Sachs being kicked around.

The buzz about a possible merger arose in the days before E*Trade announced last Monday plans to purchase the 8,500-machine ATM network owned by Card Capture Services, giving E*Trade (EGRP) the third-largest ATM network in the country.

E*Trade’s strategy is to build a network of “financial services kiosks” from which customers eventually will be able to buy and sell stocks and mutual funds. The goal, of course, is to broaden the company’s relationship with customers to encompass a range of financial services, rather than simply offer online trading.

On the surface, the move precludes a merger with a large bank, since it gives E*Trade a sizable physical presence. But ATM machines, while convenient, lack the human touch so essential to building the trust of customers. So don’t be surprised to see an eventual deal with some financial institution, though the word is that American Express is out of the picture.

No matter what happens, it appears investor interest in E*Trade has been rekindled since I last wrote about the company on Jan. 31.
Two days later, on Feb. 2, EGRP shares hit their 52-week low of 19-3/16. The stock closed on Friday at 29-1/4, a gain of 52.4 percent from the Feb. 2 low. (Shares were down early Monday afternoon to 28 3/8.)

Among the catalyst’s behind E*Trade’s recent rise include a raised earnings estimate last week from BancBoston Robertson Stephens, and a top rating for the company’s online trading service in Gomez Advisors’ Spring 2000 Internet Broker Scorecard. It was the sixth time in eight quarters that E*Group has won that honor.

Is a merger in the works? If so, how will it impact E*Trade’s stock? Discuss it here

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