Electronic trading firm Instinet has announced a fourth quarter 2002 net loss of $112 million and full year losses of $735 million.
The figures contrast with net income of $46 million for Q4 2001 and $145 million for the previous year.
The pro forma operating loss, excluding charges, was $10 million for the fourth quarter of 2002 and $8 million for the full year.
Ed Nicoll, chief executive officer of Instinet, comments: "This has been a tough quarter for us."
Fourth quarter revenues declined 23 percent to $267 million, and expenses from continuing operations rose 36 percent to $372 million, with the acquisition of rival Island ECN accounting for 55% of costs.
Nicolls says the company is on schedule to reduce annual costs by $100 million by the end of 2003. As part of this plan, the company culled 17% of its full-time employees, both in the US and in its international operations, and consolidated office space within the New York City area. A restructuring charge of $62 million was recorded for the fourth quarter in connection with these measures.
Instinet's chief financial officer, John Fay, adds: "We intend to look for more savings from the integration of Instinet and Island as the year progresses."
In January 2003, the company completed a significant component of cost-saving when it successfully converted Island's clearing to Instinet Clearing Services. The company also completed the first phase of interaction between the Instinet and Island order books by providing access to a combined virtual book. The migration of US FIX customers to a new, faster FIX protocol, ITFI-Lite, was also completed.
Looking ahead, the vendor points to new products and services intended to stem the decline in revenues from low margin transaction fees. Portal, the company's new front-end trading application, was deployed at over 600 Instinet client sites by the end of the fourth quarter, ahead of the original year-end deployment target of 400. Portal now contributes approximately 20% of Instinet's total institutional order flow. On its peak day so far (in December 2002), the system processed nearly 35 million shares. Instinet aims to double the number of customers using Portal by the end of 2003.
Newport, Instinet's patent-pending global program trading and execution management solution, was deployed at 50 clients in the US and Europe by the end of the quarter, more than twice as many as in the previous quarter. Customers are using Newport to trade in global markets, to access Instinet Global Crossing, to implement rules-based automated trading, and to route orders to other unaffiliated broker-dealers.
Reuters, which owns a 63% majority stake in Instinet, says it will include a £370 million loss before tax in respect of its one-time cashcow. This includes a normalised operating loss before restructuring of £14 million, restructuring charges of £96 million, amortisation of £21 million and a non-cash impairment charge with respect to Instinet goodwill.