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The Honolulu Advertiser
Posted on: Monday, February 11, 2002

ETrade expands its financial offerings

By Michael Liedtke
Associated Press

SAN FRANCISCO — Seeking to shed its image as a quirky, irreverent online broker, ETrade Group Inc. is putting on a pinstripe suit: morphing into a financial services octopus, peddling home loans, checking accounts, credit cards, insurance, financial advice and stock.

ETrade CEO Christos Cotsakos appeared at a media conference Wednesday in San Francisco. The company is expanding its list of financial services.

Associated Press

The biggest banks in the world have been attempting similar transformations for the better part of two decades with little success, said J.P. Morgan Chase analyst Gregory Smith.

"The strategy makes sense, but can ETrade be the one to do it right?" Smith wondered.

But the uninspiring diversification efforts of traditional banks have only deepened the conviction of ETrade chief executive Christos Cotsakos that his strategy is sound.

"Nobody has been able to do it and that's what makes it an opportunistic time for us to try it," Cotsakos said. "We have always been about changing the rules of engagement."

The Menlo-Park-based company recently introduced a redesigned Web site highlighting other financial services besides the stock trading that used to be its bread and butter. The site also bears a new brand, ETrade Financial, to emphasize the new identity, which will be promoted in a three-month marketing blitz.

This isn't a sudden shift.

During the past five years, ETrade has poured about $5 billion into acquisitions and technology to help create a one-stop shop for financial services.

Cotsakos, who became CEO in 1996 after studying consumer behavior at A.C. Nielsen, believed a Web site offering a smorgasbord of financial products would appeal to a technology-savvy audience — primarily people ranging from age 24 to 54.

Although many analysts questioned the strategy, the diversification helped ETrade weather the past year's stock market better than most online brokers.

As it broadens its menu, ETrade is becoming less dependent on stock trading.

In the final three months of 2001, ETrade collected one-third of its revenue from its banking operations. At the end of 2000, just one-sixth of revenue came from banking.