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Ameritrade aims to fly solo
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September 20, 2000: 11:37 a.m. ET
Despite merger speculation, online broker hopes to remain independent
By Staff Writer Kim Khan
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NEW YORK (CNNfn) - Last January, J. Joe Ricketts was a man looking forward to retirement, having announced plans to step down as co-CEO of Ameritrade Holding Corp. the following month. Just nine months later, Ricketts is back at Ameritrade's helm, trying to ward off takeover speculation and resuscitate his company's stock price and bottom line, which have fallen hand-in-hand most of this year.
With financial mergers seemingly happening as fast as banks and brokerages can update their letterheads these days, the latest merger speculation has shifted away from more-traditional financial service companies to a host of online brokers, particularly Ameritrade.
The reason, analysts said, is that larger investment and commercial banks, having consumed their fill of traditional banking and brokerage operations, now might look to strengthen their online brokerage capabilities, particularly as the stock prices for those companies remain depressed.
Ameritrade has been no exception. Though considered one of the better-run online brokers, the company's stock price remains nearly 40 percent below its 52-week high and more than 65 percent below its all-time high despite having posted impressive gains in the last two months.
The rumors abound
Speculation that Ameritrade was back in play grew last month when CEO Tom Lewis resigned, citing personal reasons. Later that month shares jumped as much as 20 percent on speculation Ameritrade would be bought by American Express (AXP: Research, Estimates).
"In some ways Ameritrade is a more likely candidate (for acquisition)," said Jeffrey Schuman, an online brokerage analyst with Conning & Co. "They did lose their CEO and their founder (Ricketts) is looking to retire."
But according to Ameritrade Inc. CEO Jack McDonnell, who heads day-to-day operations of the online trading company, Ameritrade has a long-term strategy that includes a heavy investment in marketing and technology, designed to extend its competitive advantage over other online brokers.
"There are 150 to 200 online brokers out there and there will be consolidation in the industry," McDonnell told CNNfn.com. "But we spent $100 million on technology, we've got the fastest Web site ... we spent $200 million on advertising and we're going to spend $200 million more.
"Many of the smaller brokerages are going to have a tough time competing," he said.
 According to Keynote, a research firm that ranks Internet performance, Ameritrade (AMTD: Research, Estimates) is the fastest Web site and more than twice as fast as its nearest direct competitor, Charles Schwab.
In fact, McDonnell added, there is a possibility Ameritrade may be more interested in acquiring other small brokerages than being acquired.
"We have bought smaller brokerages and we will continue to look for good deals as the opportunity arises," he said.
Independence stay
Tim Butler, analyst with Pacific Crest Securities, said he believes Omaha, Neb.-based Ameritrade is on an independent course because Ricketts, who owns roughly 50 percent of the company's shares, will not sell.
According to Butler, Ricketts told him he had no interest in selling the company, even at a price 25 percent above Ameritrade's 52-week high of $31.
"There is a lot of speculation about him going into retirement, but this is a company he's created," Butler said.
But another analyst said the company's dedication to remain a retail online broker, rather than offer a wide range services like rival E*Group's (EGRP: Research, Estimates) E*Trade, makes it more vulnerable to acquisition. If trading volumes fall in bad market times, profits decrease.
Schuman said since the company is at a point where its platform is built out, it is a more attractive buy than a company still developing.
McDonnell said the company wants to concentrate on one service rather than becoming a one-stop supermarket because Internet users already can find all the other services they need quite handily by surfing the Web.
He also dismissed concerns over Ameritrade's low stock price, currently about $19 and nearly 40 percent off its 52-week high.
"There's not any concern over the share price. We focus more on the business." McDonnell said. "The day-to-day stock changes are not as important as the long-term value." 
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