Online broker CSFBdirect is scheduled to be taken private by its parent
company, Credit Suisse First
Boston, at the controversial price of $4 per share.
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CSFBdirect.com (NYSE: DIR)
the online brokerage service of Credit Suisse First Boston, announced
Thursday that it is eliminating 180 positions, or 14 percent of
its domestic employees, due to a downturn in online trading activity.
This is the second major round of job cuts for CSFBdirect within three
months. In March, the company laid off 150 employees, or 10 percent of
its staff at the time, and closed its Parsippany, New Jersey call center.
Despite the cuts, CSFBdirect said it plans to continue expanding,
opening several more brick-and-mortar investment centers in the coming months.
Charlotte Fox, assistant vice president of public relations for CSFBdirect,
told the E-Commerce Times that within the "next month or so" the online
brokerage firm plans to open investment centers in Chicago; Scottsdale,
Arizona; and Sandy City, Utah. The company already operates investment
centers in New York and Atlanta, Georgia.
"We view this as a way to continue to grow our business," Fox said.
Getting the Slip
CSFBdirect said the job cuts would come from its Jersey City, New Jersey
headquarters and offices in East Brunswick, New Jersey and Charlotte,
North Carolina. About half of the job cuts will be in technology.
In addition to the job cuts, CSFBdirect said that it will reduce
space requirements in its Jersey City and Charlotte offices.
As a result of the restructuring, the company will take a one-time,
pre-tax charge of
approximately US$16 million in the second quarter.
The annual cost savings of the
restructuring was estimated by CSFBdirect to be $22 million.
Swallowed Whole
CSFBdirect is scheduled to be taken private by its parent company.
Credit Suisse First Boston is offering $4 per share for the 17 percent
of CSFBdirect stock that it does not already own, an offer that
some analysts and investors think is too low.
"With a 15 percent discount for tracking stock illiquidity, our
sum-of-parts analysis of CSFBdirect results in a $6.90 price per share,"
Putnam Lovell Securities analyst Richard Repetto reportedly said in May.
"Shareholders would be taking it on the chin at the $4 per-share price,"
Repetto said. "We strongly believe a deal, however, should be done to
rationalize what we currently view as an untenable operating structure."
CSFBdirect closed Thursday at $4.97, down 4 cents. On May 2nd, CSFBdirect
reported a net loss of $41.5 million, or 40 cents per share, for the quarter
ended March 31st. By comparison, the company reported a profit
of $13.6 million, or 13 cents per share, for the year-earlier period.
Troubled Sector
Many of CSFBdirect's closest competitors have also begun trying
to cushion themselves against falling profits by cutting jobs and expenses.
Ameritrade announced in April that it was
slashing its advertising budget
by roughly 25 percent and pink-slipping between 270 to 300 workers, or
14 percent of its payroll. Charles Schwab has also said recently
that it planned to cut about 13 percent
of its workforce, due to market conditions and lowered trading volume.
Morningstar.com analyst Harry Milling told the E-Commerce Times
recently that the coming months will be "very difficult" for
independent financial services firms that only offer online trading.
"The more services a company can offer, the better its chances of
remaining independent and alive," Milling said.
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