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"Given the severity of the pullback in client activity and our outlook regarding the potential duration of this environment, we are taking further measures to improve our financial performance," said Charles R. Schwab, chairman and chief executive.
The decision to cut the 2,400 positions follows cuts already announced this year including a 15 percent workforce reduction announced in March. The company said its latest round of job losses would include almost 2,000 layoffs with the remaining 400 job losses coming from attrition to be completed by year's end.
These cuts, as well as other restructuring charges, are expected to result in a USD225 million charge demonstrated over the rest of 2000 but would also result in a reduction of quarterly pre-tax operating expenses of USD65 million.
In early 2000, Schwab acquired CyberCorp.com for USD488 million in stock, a company founded by Irish native Philip Berber in 1995. CyberCorp makes technology that lets active stock traders buy and sell shares on-line and the acquisition was expected to give Charles Schwab more power to serve the burgeoning market for on-line traders. CyberCorp was based in Austin, Texas.
In fact, the market for on-line trading has fallen away recently with many day-traders wary of the volatile conditions on the market. According to research quoted in the Financial Times from Solomon Smith Barney's Guy Moszkowski, trading volume in the on-line brokerage sector slowed by 12 percent in the second quarter from the previous quarter.
Schwab himself said, "As our clients grapple with the toughest market environment that many of them have ever faced, they have scaled back their investing activity significantly -- they are currently trading about 50 percent less than they were at the beginning of the year."
Earlier this week, on-line trading giant E-Trade Group announced that it would restructure its business and would acquire Dempsey & Company to counter the effects of the slowdown. The company said it would consolidate and move several facilities. E-Trade's latest acquisition, and the company's decision to consolidate, has come after a series of 16 acquisitions made in three years for the company. E-trade said its consolidation included the movement of offices on both US coasts as well as the consolidation of back-office operations in both the UK and Scandinavia. While the company has decided not to cut jobs at this time, the move is expected to save E-Trade USD60 million to USD70 million pre-tax annually. E-Trade shares were up strongly following the news, rising 8.5 percent.
Other recent job cuts in the on-line trading sector include 80 layoffs from Thomas Weisel Partners, while Ameritrade bought a competitor, National Discount Brokers, and had two rounds of layoffs this year to cope with the slowdown in trading.
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