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Merrill cutting 9,000 jobs
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January 9, 2002: 1:44 p.m. ET
Brokerage firm to take $2.2B charge, shares gain on cost-cutting move.
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NEW YORK (CNN/Money) - Merrill Lynch & Co. said Wednesday it cut 9,000 more jobs, or about 14 percent of its work force, and will take a $2.2 billion charge as the nation's No. 1 brokerage joins fellow Wall Street firms in aggressively cutting costs.
Investors reacted positively to the action, sending Merrill's stock up nearly $3 in midday trading Wednesday.
New York-based Merrill (MER: up $2.76 to $59.20, Research, Estimates) said the cuts - coming from divestitures, buyouts and layoffs - would save about $1.4 billion a year. Roughly $1.2 billion of the fourth-quarter charge reflects severance costs related to the job cuts.
The 9,000 cuts come on top of 6,000 made earlier last year. Combined, the cuts reduced Merrill's total head count to 57,000 from 72,000 at the start of 2001.
"Generally I'm pleased from a shareholder perspective with what's going on," CIBC World Markets analyst Ken Worthington said. "They've made a significant restructuring, which will result in significant cost savings, much of which will fall to the bottom line. This breaks them out from being a very inefficient, large brokerage house."
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CNNfn's David Haffenreffer reports on Merrill's job cuts.
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The company has already notified affected employees and many have already departed, Merrill Chairman David Komansky told analysts during a conference call Wednesday.
"We have gone through great pains to ensure that we have not cut into the muscle of our business," Komansky said, adding that while an economic recovery is coming, the pace of the rebound is in question.
Whisperings of huge cuts at Merrill surfaced in October after a published report citing top company officials said the firm could slash as many as 10,000 jobs. Merrill confirmed at the time it was mulling job cuts, but declined to provide any guidance.
Wall Street brokerage firms have seen a sharp falloff in investment activity as well as in advising and underwriting mergers and acquisitions. The sliding economy, pushed further into a recession by the terrorist attacks on the World Trade Center and the Pentagon, caused businesses and individuals to dig in and wait out the rocky times.
On Dec. 19, Morgan Stanley (MWD: Research, Estimates) posted a 28 percent drop in its fiscal fourth-quarter earnings as it slashed more than 1,000 jobs in the period.
Citigroup (C: Research, Estimates), which slashed 3,400 jobs back in August, and J.P. Morgan Chase (JPM: Research, Estimates) both reported lower third-quarter earnings on Oct. 17, citing declining business in the wake of the terrorist attacks.
Additionally, Citigroup was forced to pay out millions in attack-related insurance claims. On Dec. 19, Citigroup unveiled plans to sell up to 20 percent of its Travelers insurance unit in an initial public offering.
Merrill also said it expects fourth-quarter earnings of 48 cents to 50 cents a share, excluding the charges, when it reports results the week of Jan. 21. Wall Street analysts are forecasting 48 cents a share on average, according to First Call, which tracks earnings estimates.
The firm anticipates fourth-quarter revenue will fall 8 percent from the third quarter, due chiefly to lower debt trading and reduced investment banking activity.
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In addition, revenues were hurt as Merrill had to move and then relocate trading, investment banking and research employees back into the company's World Financial Center headquarters, damaged in the terrorist attacks.
Merrill announced the cuts shortly after saying it planned to slash 1,200 jobs and ditch 20 of its 28 branches in Japan. As in the United States, Merrill is scaling back Japanese retail operations in an effort to stem a flood of red ink. 
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