Ameritrade To Cut Jobs, Spending

In a bid to weather the harsh stock market climate that is currently battering online brokerage houses, Ameritrade (Nasdaq: AMTD) announced Thursday that it is slashing its advertising budget by roughly 25 percent and pink-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 the cuts would be implemented at call centers in Omaha, Nebraska, and Fort Worth, Texas. At the time, the firm said that customer service employees would not be let go.

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

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

Trading Decline

Online brokerages have been hit particularly hard by the plunging markets, as scores of 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 of 100,000 trades per day, which represents about a 12 percent downturn from the average 114,000 daily trades processed in February.

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

Lowering the Bar

Last month, Ameritrade lowered its revenue projections 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 at the end of March, down from $130.7 million in the first quarter and below management'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 $570 million to $650 million of the year.

The brokerage firm also has experienced a recent management shakeup and announced 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 also have begun trying to cushion themselves against falling profits by cutting jobs 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 its first-quarter advertising budget by 48 percent to offset declining revenues. The company also warned that it expects earnings for the year to range from breakeven 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.