E*Trade Reshuffles Ops, Buys Specialist

One day after Gateway Inc. announced a major overhaul, Menlo Park, Calif.’s E*Trade Group Inc. Wednesday vowed to streamline its operations to boost

Just as the computer maker took a major charge, E*Trade estimates a significant one — $220 to $245 million in the third quarter to
go along with $60 to $70 million in annual pretax savings. But unlike Gateway’s announcement, which was tainted a bit by its pledge
to cut 5,000 jobs, or 25 percent of its workforce, E*Trade’s tightening seems purely steeped in real estate at this point; the
online financial service provider hopes to curb fixed cost structure by moving operations from its San Francisco facility into
existing facilities in Menlo Park and Rancho Cordova, as well as the yet-to-be-opened E*TRADE Center in San Francisco. In a conference call, E*Trade board members said they did not anticipate a reduction in headcount.

It also plans to consolidate office space in Alpharetta, Georgia, and streamline its ATM and banking divisions by transitioning
E*Trade Access from Portland, Oregon to E*Trade Bank’s Operating Center in Arlington, Virginia. E*TRADE will consolidate facilities
in the United Kingdom and the Scandinavian countries, too.

E*Trade hopes these moves will yield a more low cost global infrastructure, according to company Chairman and Chief Executive
Officer Christos M. Cotsakos.

“…E*TRADE will now take several steps to further optimize its operating environment as part of its global post-merger integration
efforts,” Cotsakos said in a public statement.

While the online broker got leaner in some areas, it gorged on market-making and specialist services Wednesday by purchasing Chicago’s Dempsey
& Company LLC for $173.5 million, $20 million of which was cash and $153.5 million in E*Trade common stock. E*TRADE expects Dempsey
to generate $100 to $110 million in revenues and earnings per share of 5 to 7 cents for 2002.

Why buy Dempsey? E*Trade will gain a market-making prowess which could help it expand its financial services offerings, providing
even more value for customers. By enhancing profitability on its trades, E*Trade is banking on the notion that it will be able to
pass value created from its platform along to customers.

Cotsakos said he anticipates that the purchase of Dempsey will boost profitability despite current market trends, and “allow us to
gain a solid, strategic foothold within the specialist industry at a value-added price.”

Shares of E*Trade closed down 12 cents on the day, to $5.99 before the dual announcements, but it could give investors something to
cheer about come Thursday morning. The real estate trimming and acquisition should go over better than recent E*Trade news, which
included the folding of its $30 million E-Commerce Index fund into the $47 million E*Trade Technology Index portfolio two weeks ago.
The fund had bled nearly 60 percent in the past year.

In July, E*Trade’s trouble with the National Association of Securities Dealers’ (NASD) came to a head when it was fined $90,000 for
advertising that was allegedly misleading. E*Trade agreed to the terms of the settlement but did not admit or deny the NASD

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