While Rivals Struggle, Fidelity Sharpens Its Technology Edge

Privately held Fidelity Investments is trying to turn the mutual fund industry's malaise into a competitive edge. While rivals lay off workers and slash costs, Fidelity is betting big other firms are too strapped for cash to keep up with its deep pockets.

Technology will be a key weapon. Fidelity is upping its information technology budget 20% this year, to $2.3 billion. The next generation of gizmos the company hopes will feed its $855 billion investment machine was on preview at an InfoFest show on Apr. 24 for employees and a handful of outsiders. Abigail P. Johnson, 39, Chairman Edward C. Johnson 3d's daughter and heir apparent, was there to check on the progress of some of her pet projects. Now No. 2 at Fidelity's mutual-fund unit, Johnson says: "Technology leadership is an imperative for Fidelity."

WIRELESS SKEPTICS. Maybe so, but achieving it is not certain despite the big budget. Fidelity has not always been a technological leader in the financial-services industry. And while many of the 200 projects shown at Infofest are ambitious, some are also at an early stage. "Fidelity is the kind of company that throws things on the wall to see what sticks," says Ron Shevlin, research director for online financial services at Forrester Research of Cambridge, Mass. "Some of their projects will succeed, some won't."

Shevlin is skeptical about wireless financial services, in which Fidelity is making a big push. One prototype product, called Natural Broker, requires next-generation cell-phone technology that's two years away from public release by Fidelity's own reckoning. Customers, using a hybrid personal digital assistant, will be able to make stock trades or request stock research using voice commands.

Fidelity is betting that Web TV, still a nascent technology, will spread quickly in the next few years. This summer, it hopes to roll out interactive ads when Fidelity market experts such as Peter Lynch, former Fidelity Magellan Fund star, appear on TV. Viewers can click on the ad to order investment material or trade stocks at Fidelity's Web site.

A planned software tool could be a huge timesaver for investors. It "listens" to corporate earnings conference calls, flags keywords such as "operating earnings," and links to a Web site that lets a listener start from where the speaker mentions the keyword.

Automated services could prove to be winners. They range from instant messaging to help clients open new accounts online to software allowing customers to plug into financial-plans data from accounts at multiple financial institutions over the Web. A new "benefits portal" for corporate customers, who account for more than half of Fidelity's business, is already running. It lets clients manage all their corporate plans, even those not run by Fidelity.

If it all works, Fidelity could scoop up loads of business--providing its funds have good returns, too.

By Geoffrey Smith in Boston

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