Hurt by decline in trading, Schwab cutting 2,400 more jobs
Posted at 7:22 p.m. PDT Thursday, Aug. 30, 2001
BY DEBORAH LOHSE
Mercury News
Financial-services firm Charles Schwab, reeling from continuing steep drop-offs in investor trading, said Thursday it will cut up to 2,400 jobs, or 11 percent of its workforce, in its second round of reductions since March.
San Francisco-based Schwab also plans to consolidate office space in cities such as San Francisco, Denver and Phoenix, and shut down some network servers added in recent years to handle booming trading volumes before the market fell off.
The company said the additional cuts -- up to 2,100 from layoffs, the rest from attrition -- are necessary to maintain profitability goals in the face of customer trading volumes that are at their lowest level since October 1998. Schwab earned $199 million through the first half of this year, a 54 percent drop from the same time last year.
After both rounds of layoffs, head count will be 25 percent lower than at the start of the year.
In the first nine days of August, Schwab customers traded an average of 112,000 times a day in revenue-generating trades, down from 170,000 when layoffs were announced in March. (Certain trades, including trading in Schwab OneSource mutual funds, don't generate commissions.)
``We didn't think we'd get that low,'' said Chief Financial Officer Christopher Dodd. ``We didn't think the bear market would be that brutal or that long.''
Other firms are also trying to cope by cutting costs or buying competitors.
Ameritrade bought a competitor, National Discount Brokers, and has had two rounds of layoffs. E*Trade of Menlo Park on Wednesday said it would buy a stock-trading firm and consolidate certain facilities.
At Schwab, the cost of severance and other items will reduce earnings by $225 million over the rest of the year, the company said, while the layoffs will cut about $65 million a quarter from expenses starting next year.
Schwab didn't specify which employees will be affected by this round of cuts, except to say that it will involve more senior, higher-paid employees than last time.
The firm now has 4,500 call-center workers; 3,000 advisers and support staff in branches; 3,000 technology employees; 2,700 employees at U.S. Trust adviser to the wealthy; 800 capital-markets employees, including about 100 traders; 1,500 international; and about 800 operations employees.
Dodd said Schwab is also suffering in its stock-trading unit, Schwab Capital Markets, where a new practice of pricing stocks in increments of a penny instead of fractions has squeezed profits. That's because competing stock traders can now win business from one another by making their price to buy or sell one penny better, rather than the old norm of about six cents.
Analysts said it's too soon to tell if Schwab's moves will be enough.
``Investors aren't trading because the market has punished them,'' said Richard Repetto, an analyst with Putnam Lovell in New York. ``If the market gets better, over time retail investors will gain more confidence.''
Contact Deborah Lohse at (408) 271-3672, or dlohse@sjmercury.com |
