Amid Market Woes, Ameritrade Cuts Jobs

Internet brokerage firm Ameritrade Holding Corp. (Nasdaq: AMTD) announced Monday that it has cut more than 230 full-time employees from its payroll, or roughly 9 percent of the firm's more than 2,500 workers. In addition, Ameritrade said that 100 temporary employees will be let go.

"We took this action based on current adverse market conditions," Ameritrade spokersperson Donna Kush told the E-Commerce Times, noting that the layoffs will help "ensure the long-term success" of the Internet's fifth largest brokerage.

Kush also said that the company will maintain 40 of the 100 temporary positions and is offering those jobs as full-time positions to some of the staffers who were terminated.

"We're very confident that we'll be able to pull down [the 230 job cuts] to 190," said Kush.

Widening Losses

The layoffs will primarily affect employees at Ameritrade's customer service, new accounts and trading departments in Forth Worth, Texas and Omaha, Nebraska.

"As our growth and needs warrant in the future, we'll look into the possibility of bringing back some of those displaced workers," Kush said.

Despite its hopes for the future, Ameritrade also said Monday that it expects to incur a larger-than-expected loss for the first quarter ending January 18th, due in part to US$1.5 million restructuring charge. The company said that the per share loss will probably fall in the range of 12 cents to 14 cents.

Analysts had expected Ameritrade to report a loss of 5 cents per share, according to research firm First Call/Thomson Financial.

Ameritrade expects revenues for the first fiscal quarter of 2001, which ended December 2000, to be between $127 million and $132 million. Revenue is expected to consist of commission revenue (including payment for order flow) of $80 million to $82 million, net interest revenue of $42 million to $45 million, and other income of about $5 million.

Trading Activity

In a separate statement issued Monday, Ameritrade said that it had 1.356 million open accounts at the end of 2000. The company said 52,000 new accounts were opened in December, a 30 percent spike from the number of new accounts opened in November, but down from a peak of 131,000 new accounts gained in January 2000.

The brokerage also reported an increase in the average daily trade volume, which hit 115,000 in December, a 10 percent jump from the same period in 1999.

Ameritrade averaged 111,000 trades per day for the first quarter of fiscal 2001, a 37 percent increase from 81,000 trades per day during the same period last year.

More Troubles

Ameritrade has also been dogged of late by the failure of its financial services portal OnMoney to yield significant returns.

In its most recent regulatory filing with the U.S. Securities and Exchange Commission, the company said it has "incurred significant losses since [OnMoney's] inception," spending a total of roughly $90 million on development, including about $78.7 million during fiscal 2000. However, revenue from the portal amounted to just $602,000 last year.

"We anticipate a continuing need to make significant capital investments in OnMoney for the foreseeable future, and there can be no assurance that OnMoney will achieve profitability in the future or that we will receive an adequate or any return on our past or future capital investments," Ameritrade said in its SEC filing.

Ameritrade has also been without a permanent chief executive officer for several months. The former CEO, Tom Lewis, resigned in August for personal reasons, the company said. At the time, Ameritrade said company founder Joe Ricketts would serve as interim CEO, while an executive search firm looked for a permanent replacement.

Other Brokerages Hit

Ameritrade is not the only online brokerage to be scorched in the recent market meltdown.

On Sunday, Morgan Online, the banking site of J.P. Morgan Chase & Co., said it is laying off roughly 150 employees in sales, marketing and client acquisition. The firm said it intends to focus on serving existing clients.

Last month, Charles Schwab said that it had instituted a hiring freeze and would temporarily freeze the salaries of hundreds of its top executives until market conditions take an upturn.