Online gloom deepens as Ameritrade and Morgan swing axe

Online gloom deepens as Ameritrade and Morgan swing axe

Casualties from the Internet market slump continue to pile up as US online brokerage Ameritrade cuts more than 230 full-time employees and terminates the contracts of 100 temporary employees, and Morgan Online takes the axe to half its staff.

The cutbacks at Ameritrade, the US' fifth largest Internet brokerage, came as the company reported larger-than-expected first quarter losses. Losses per share are expected to be in the 12 to 14 cents range, against analyst expectations for a first quarter loss per share of 5 to 6 cents.

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.

Ameritrade claims 1.36 million accounts by the end of 2000. The company says 52,000 new accounts were opened in December, 30% up on November, but significantly down on the record 131,000 new accounts signed in January 2000.

Ameritrade's OnMoney financial services portal also continues to drain resources. The company has so far spent $90 million on development of the portal, but recorded revenues last year of only $602,000.

Ameritrade is not the only online brokerage to wither as market conditions continue to deteriorate. On sunday, Morgan Online, the banking site of J P Morgan Chase & Co announced plans to lay off 150 employees in sales, marketing and client acquisition as part of a strategic shift away from pure online financial services provision. Charles Schwab has also scaled back, freezing technology investments and salaries while promoting its retail bricks and mortar credentials.

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