Goldman Seen Cutting Up To 2,000 Jobs In Coming Weeks
By LYNN COWAN
Of DOW JONES NEWSWIRES
WASHINGTON -- Goldman Sachs Group Inc. (GS) is expected to lop as many as 2,000 jobs beginning next week, with the possibility of more layoffs coming later in the spring if the market doesn't pick up.
Securities industry analysts said Thursday the work-force reduction in coming weeks would result from Goldman's normal performance-evaluation process, albeit at a steeper pace than in recent years. The New York investment bank culls low-performing employees annually at a rate of 5% to 10%, and during good years, replaces them with new hires. In the past several years, Goldman has stuck to the low end of cuts, trimming about 2% to 3% of its staff, said analysts; this year, it is expected to cut as much as 10%.
"Of all the firms I've talked to on the Street, I do get the impression that Goldman is moving faster than its brethren to line up for another line of cuts," said Merrill Lynch brokerage analyst Judah Kraushaar. "Of course, you have to view them in the context of the fact that last year, their job cuts were much less intensive than their competitors'."
Most of the Goldman jobs eliminated are expected to be concentrated in the mergers-and-acquisitions and equity-issuance departments, two business segments that have suffered most in the current market environment. Some trims are also expected to be made in the company's equity-research division, particularly given a change in management earlier this month that brought in a former Merrill Lynch & Co. executive to help head up the department. In 2001, Goldman's research team slipped to seventh place from fifth in Institutional Investor magazine's influential poll of money managers.
"It declined much more than would have been expected or that Goldman would find acceptable," said Salomon Smith Barney securities analyst Guy Moszkowski. "I think you're going to see some action there and some reshuffling."
Prudential Securities analyst David Trone said he doesn't think Goldman's performance evaluations will be as tough as some of his peers expect, although he does concur that some research analysts will receive pink slips. Trone said he is looking for about 500 layoffs to result from poor performance reviews in the next few weeks.
"I think they want to avoid anything real big and lumpy and headline-grabbing," he said.
Beyond the performance-review-related reductions, some on Wall Street are expecting Goldman will end up making deeper cuts later in the spring if market conditions stay sluggish. The industry's predictions in December that the worst was over in equity issuance and merger activity haven't been borne out, and the fallout from Houston energy company Enron Corp.'s (ENRNQ) collapse has continued to pressure both businesses. There have been just nine initial public offerings so far this year, the lightest period since 1991, according to Richard Peterson, chief market strategist at Thomson Financial in New York. There have been 805 announced M&A deals, down 50% from this time last year, said Peterson.
In M&A in particular, where announced deals can take several quarters to close, the revenue stream doesn't look promising, said Fox-Pitt Kelton brokerage analyst Rielly Tierney.
"Unless the announced deals start picking up right now, you're going to have a difficult environment for the rest of the year," said Tierney. "Visibility for M&A (revenue) is done by the end of April."
Tierney said he expects Goldman will end 2002 with fewer employees, although the percentage decline won't be nearly as steep as at Merrill Lynch & Co. (MER), which in 2001 cut 15,000 jobs, or 21% of its work force.
In 2001, Goldman Sachs maintained that it would end the year with its headcount flat at 22,627. In late December, chief financial officer David Viniar told reporters that he thought the company was "sized appropriately" for 2002. But earlier this month, at a financial-services conference, Viniar said the company was reviewing its headcount and expenses, and said the business environment was more difficult than he had envisioned.
A Goldman Sachs spokeswoman wasn't immediately available to comment Thursday on the firm's layoff plans. Earlier this week, the company said it wouldn't comment on rumors when asked about possible layoffs.
-By Lynn Cowan, Dow Jones Newswires; 202-628-9783; Lynn.Cowan@dowjones.com
Updated February 28, 2002 1:08 p.m. EST |
