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Non-Tech : E*Trade (NYSE:ET) -- Ignore unavailable to you. Want to Upgrade?

To: Wowzer who wrote (3370)	7/22/1998 9:32:00 PM
From: TLindt	Read Replies (1) \| Respond to of 13953

I don't know if anybody saw this, but part of what E-Trade plans to do with some of that SoftBank money is get 1 Million accounts. ETrade Shrs Off 8%; Co. Sees Losses From Ad, Other Costs By Eric Weiner NEW YORK (Dow Jones)--Shares of on-line brokerage firm ETrade Group Inc. (EGRP) were down more than 8% Wednesday after the company revealed it will incur losses in the coming quarters as it bulks up its spending on advertising, acquisitions and improving its global network. ETrade's Nasdaq-listed shares were recently down 2 3/4, or 8.6%, at 29 1/4 on volume of 1.8 million shares compared with average daily volume of 1.1 million. Analysts said the downturn in ETrade's stock price is the result of a few paragraphs at the bottom of an otherwise strong fiscal third-quarter earnings report released after the market closed Tuesday. The company posted earnings of 16 cents a diluted share, in line with analysts' expectations and above the 9 cents a share earned in the year-ago quarter. And its revenue growth was stronger than many market observers had expected. But, in the statement, ETrade said it plans "heavy investments and expenditures over the next several quarters" that will result in losses over that time frame. The costs will fuel "aggressive marketing programs to build brand and accelerate the growth of ETrade's customer base; strategic acquisitions; and further infrastructure enhancements and research and development activities in support of the ETrade global network." The company didn't offer any guidance on the extent of the losses or how long they will last. It also didn't elaborate on the kinds of partnerships it will look for. "They're in the middle of executing a strategy," said Bill Burnham, an on-line trading analyst with Credit Suisse First Boston Corp. "I think they're entering a period where the stock will range-trade while the company waits for the strategy to take effect. Some people may have decided that this was a good time to take some money off the table." Raymond James & Associates Inc. analyst Phil Leigh said he believes the company will post losses for the next three quarters. Leigh expects the company to report a loss of 15 cents a share in its fiscal fourth quarter, 14 cents in its fiscal first quarter, and 9 cents in the fiscal second quarter. He said the company should return to breakeven in its fiscal third quarter of 1999. "I think the market's misinterpreted the signals here," Leigh said. "What they've done is decided to launch a holy war to gain market share. They will spend the money on marketing and promotion and the development of an on-line community to attract new customers." Leigh said the company's goal is to attract one million new customers by the end of 1999, which is significant because ETrade had just 459,000 customer accounts at the end of the fiscal third quarter. The company is flush with $600 million in available cash to fund this growth, largely because of a recently announced $400 million investment by Softbank Corp. of Japan. However, the success of the company's strategy could depend on how its competitors respond, Burnham said. For example: Say the company already spends $100 million a year on advertising and decides to ratchet it up to $200 million. If its competitors also double their advertising spending, each company's market share could stay the same while they line the pockets of various broadcasting executives. Meanwhile, class A shares of Ameritrade Holding Corp. (AMTD) surged 13% Wednesday on heavy volume after the company cruised past analysts' estimates for its fiscal third-quarter earnings. Ameritrade Nasdaq-listed shares recently were up 4 3/4, or 12.8%, at 41 3/4 on volume of 668,700, compared with average daily volume of 143,400. Earlier, the shares reached 42 3/4, a 52-week high; the previous high of 40 3/8 was set July 13. After the market closed Tuesday, the Omaha, Neb., on-line trading firm reported operating earnings of $5.4 million, or 37 cents a diluted share, compared with $4.6 million, or 32 cents, a year ago. A survey of four analysts by First Call Corp. projected Ameritrade would earn 34 cents. Ameritrade's improvement from its fiscal second quarter was even more impressive. In the prior period, the company posted a loss of $270,874, or 2 cents a share, largely because of marketing costs. Over the winter, Ameritrade blitzed the airwaves with a advertising binge designed to improve its profile in the on-line brokerage business and push its low $8 stock commissions. At the time, the company was derided for spending too much on marketing costs. But, now the company appears to be reaping the rewards in the form of a much larger client base. "Spending all that money at the end of 1997 has paid off," Credit Suisse's Burnham said. "They got a tremendous boost. The firm's on a little bit of a roller coaster right now, but they boosted their profile and grew the company like a rocket ship." Ameritrade on Tuesday also announced a 2-for-1 stock split payable Aug. 17 for shareholders of record as of Aug. 7. Analysts said the company's stock price also is getting a jolt from Wednesday's announcement that it reached a two-year agreement with America Online Inc. (AOL) to feature Ameritrade's securities trading services on AOL's Personal Finance Channel. Ameritrade will pay AOL $25 million as part of the agreement. The company joins competitors DLJdirect, E*Trade and Waterhouse Securities on AOL. "They sort of are the guest that showed up late," Burnham said. "Even though everyone expected them to be at the party." - Eric Weiner; 201-938-5298 "Dow Jones News Service" "Copyright(c) 1998, Dow Jones & Company, Inc."