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Instinet makes further cuts; warns of Q1 trading loss

27 March 2002  |  3195 views  |  0 Reuters Sign

Reuters' electronic trading subsidiary Instinet has initiated a further $120 million of operating cost cuts and warned that it may incur a net operating loss in the first quarter of 2002.

The group, which is currently engaged in a savage price-cutting war with rival alternative trading systems, says the latest cuts are in addition to the $60 million cost reduction target announced last month. Instinet says it will now incur a pre-tax restructuring charge of approximately $55 million during the first half of 2002, in comparison to the earlier estimate of $25 million.

The company says the cuts will address the immediate revenue shortfall arising from the recent round of price reductions offered to US broker-dealer customers, and will be achieved by the end of the second quarter.

Instinet's signalling of possible Q1 operating losses has caught analysts on the back-foot, leading to an immediate 11 per cent drop in the company's shares, which are trading down $0.7 at $5.71. Reuters, which took a pounding last month when Instinet first announced its price cutting programe, is currently trading at £5.36, only marginally down from yesterday's close of £5.43.

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