Ameritrade To Cut Jobs, Spending

In a bid to weather the harsh stock market climate that is currentlybattering online brokerage houses, Ameritrade (Nasdaq: AMTD) announcedThursday that it is slashing its advertising budget by roughly 25 percent andpink-slipping between 270 to 300 workers, or 14 percent of its payroll.

The Omaha, Nebraska-based firm, which previously said this round of layoffs would affect about 170 employees, attributed the deeper cuts to “continuing slow market activity.”

Ameritrade said earlier this month that thecuts would be implemented at call centers in Omaha, Nebraska, and FortWorth, Texas. At the time, the firm said that customer serviceemployees would not be let go.

The layoffs, which Ameritrade said will allow it to saveUS$12 million annually, are the company’s second round of cuts this year. In January, Ameritradeshaved its rolls by 9 percent, or about 230 full-time employees, andeliminated 100 temporary positions.

In addition, the online brokerage said it is paring the $200 million it hadearmarked for advertising spending by $50 million to $60 million.

Trading Decline

Online brokerages have been hit particularly hard by the plunging markets, as scoresof investors have put the brakes on the trading activity that hit record levels last year.

For instance, Ameritrade registered an average trading volume last month of100,000 trades per day, which represents about a 12 percent downturn fromthe average 114,000 daily trades processed in February.

However, the company saw an increase in the number of new accounts openedfrom the previous month, with 56,000 new accounts opened in March for atotal of 1.48 million.

Lowering the Bar

Last month, Ameritrade lowered its revenueprojections for the previous quarter and the year. It said at the time that it expected revenue to total $107 million to $126 million in the second quarter, which concluded atthe end of March, down from $130.7 million in the first quarter and belowmanagement’s previous projection of $115 million to $138 million.

For fiscal 2001 as a whole, Ameritrade lowered its revenue forecast to between $470 million and $600 million. In January, the company had said it expected revenue of $570million to $650 million of the year.

The brokerage firm also has experienced a recent management shakeup andannounced earlier this month that it will begin tacking on fees for paper trade confirmations, as well as account maintenance, in an effort to diversify its revenue streams.

Money Pit

Ameritrade is not alone in its woes. Many of its closest competitors alsohave begun trying to cushion themselves against falling profits by cuttingjobs and expenses as well as lowering performance expectations.

Charles Schwab recently said it planned to cut about 13 percent of its workforce, due to market conditions and lowered trading volume.

Meanwhile, E*Trade announced earlier this week that it is slimming itsfirst-quarter advertising budget by 48 percent to offset declining revenues.The company also warned that it expects earnings for the year to range frombreakeven to 5 cents per share on revenue of $1 billion to $1.2 billion.Analysts were predicting a 2001 profit of 13 cents per share on revenue of$1.4 billion.

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

Related Stories

Technewsworld Channels