Online Broker Cuts Jobs Amid Real-World Expansion

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.