Ameritrade Reorganizes

Omaha, Neb.-based Ameritrade Holding Corp., its bottom line suffering from a
rapid decline in online trading thanks to the bear market for tech stocks,
today reorganized the company to serve two diverse client groups.


The company established a private client unit to deal with individual
customers, including its traditional online small investor, and an
institutional client group to serve large customers such as banks and hedge
funds.


Calling it the largest reorganization in its 26-year history, the company added the positions of Chief Strategy Officer and Chief
Administrative Officer.


“Through this reorganization, we will maximize our existing assets by
deploying every Ameritrade employee to either directly serve clients or
directly support someone who does…” said Joe Moglia, Ameritrade’s CEO.

Moglia will oversee a newly created executive management team consisting of
Pete Ricketts and Vince Passione, who will head the private client and
institutional client divisions, respectively; Chief Financial Officer Randy
MacDonald; Chief Strategy Officer Phylis Esposito; Chief Administrative
Officer Kurt Halvorson; General Counsel Ellen Koplow; and Co-Chief
Information Officers Mok Choe and Raymond Dury. Moglia will continue to
report to Founder and Chairman Joe Ricketts.


A single Ameritrade Technology Group will be leveraged across both divisions,
aimed at capturing synergies in product development for clients of each
business unit. The company said it also plans to offer new, tiered levels of
products and services aimed at its various types of discount brokerage
customer, from long-term investors to day-traders.


The institutional client division will target seven institutional client
segments, banks and credit unions on a co-branded basis; broker/dealer, hedge
fund and money management clients; employee benefit programs featuring
Ameritrade offers and services; retirement services; international services;
services for independent registered investment advisors; and clearing
services for broker/dealers as well as the investment advisory and banking
industries.


Moglia said in a conference call that financial services is a cyclical
business that has faced adverse conditions for more than a year. “This is a
big step for our company,” he said. “We’ve got a lot of work ahead of us but
this reorganization is an opportunity to unlock the value” in the brand.

Apparently Ameritrade’s widely reported attempt to be acquired by Canadian Imperial Bank of Commerce (CIBC) has
fallen through, and the company is proceeding with a renewed effort to
restore profitability.


And it certainly is not the only online brokerage that is being forced to
scramble. At least one recent article on financial site Fool.com was
headlined: “Is Online Trading Dead?”


Ameritrade no doubt would answer that by saying no, but it’s clear the
landscape has changed. Even the leading online brokerage, Charles Schwab turned in another disappointing monthly report for May, when
it saw average daily trading volume drop 11 percent from last May and 7
percent from April.


Last March Ameritrade named a new CEO, Moglia, who had been a senior vice president in Merrill
Lynch & Co. Inc.’s private client group.


And just last week the company named a new chief strategy officer and wasn’t
shy about saying that the move was part of a restructuring plan meant to
improve results. Phylis Esposito, an outside management consultant, will be
responsible for mergers and acquisitions, strategic alliances, business
development and investor relations, the company said, adding that it is
proceeding with its client-focused restructuring.


The company has been struggling financially for several quarters. For the 26
weeks ended March 30, revenues fell 13 percent to $282.3 million. Net loss
totaled $77.2 million, or 30 cents a share, up from $18.5 million.


The company’s stock closed at $6.37 on Tuesday, well down from its 52-week
high of $21.50. The 52-week low is $3.75.


In a May 14 10-Q filing with the Securities and Exchange Commission,
Ameritrade said that its second 2001 fiscal quarter was adversely affected
“by a decline in commissions and clearing fees of 39 percent to $76.4 million
from $126 million in the same period a year earlier.”


The decline was primarily attributable to a decrease in the number of
securities transactions processed, as average trades per day decreased 24
percent to 113,000 in the second quarter of fiscal 2001 from 149,000 a year
earlier.


Clients averaged approximately five trades per account during the second
quarter of fiscal 2001, compared to more than 11 trades per account during
the second quarter of fiscal 2000.


At the time, the company said in the report that it anticipates “that our
available cash resources and credit facilities will be sufficient to meet our
anticipated working capital and capital expenditure requirements for at least
the next 12 months.”


The company said in its report that it has a revolving credit agreement with
a bank group that permits borrowings up to $60 million through December 31,
2001.


Analysts polled by Thomson First Call are expecting the company to cuts its
loss for the third quarter, with a current mean estimate of a loss of 1 cent
a share for Ameritrade’s next reporting period.

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