Microsoft buys 4% stake in London Stock Exchange

Microsoft (NASDAQ: MSFT) has entered into a 10-year strategic partnership with the London Stock Exchange Group (LSE: LSEG) – including scooping up a 4% stake in the exchange.

The partnership will reportedly help Microsoft generate an additional US$5 billion in revenue and will co-build a “centralised, financial data platform,” which is described as being an “open all-in-one data, analytics, workflow and collaboration solution” for the finance ecosystem.

This follows LSEG’s acquisition of the financial market data and infrastructure provider Refinitiv in 2021.

Microsoft has agreed to supply cloud infrastructure to extend the capabilities of LSEG’s and Refinitiv’s combined data sets.

The co-created platform will reportedly enable “seamless data democratisation, collaboration and new monetisation opportunities”.

‘Re-imagining client experiences’

The collaboration intends to eliminate the problem of finance professionals using siloed applications and terminals by combining them into one centralised platform that will help “re-imagine client experiences”.

Crucially, data can then be interacted with through using Microsoft’s suite of productivity and analytics tools such as Teams and Azure.

This then presents a challenge to existing providers that lack these encompassing features, which is most of the competition.

These providers include marquee brands such as NASDAQ, Bloomberg, Morningstar and many others.

Cost and risk reduction benefits

One particular advantage of unifying financial data, analysis, and collaboration tools into one was that it was said to reduce costs across the value chain. When these parts are drawn together, information can be accessed and saved within a single secure environment – eliminating the need for third-party servers that cause privacy and compliance risks.

More broadly for Microsoft, acquiring the 4% stake in LSEG could be seen as a way of reinvesting back in its own business by strengthening its competitive moat.

Microsoft faces intense competition in its Business and Servers operating segments, which are inhabited by rivals such as Oracle and Google.

Keeping a greater share of users tied into its ecosystem of Microsoft products allows for up and cross-selling opportunities that can’t easily be snatched away by its competitors, as well as keeping software subscription revenue ticking over.

LSEG stands to benefit equally as much through the pair rolling out additional products along the roadmap which are expected to lift its revenues “meaningfully” as time goes on.