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Schwab to pay to upgrade
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March 30, 1999: 7:01 p.m. ET
As glitches abound, broker to spend $200M in '99 on its online systems
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NEW YORK (CNNfn) - Charles Schwab Corp. expects to spend about $200 million to beef up its information systems in 1999, largely to rework its Internet trading systems that have been plagued by a series of outages recently.
In its annual filing with the U.S. Securities and Exchange Commission Tuesday, Schwab (SCH) said it expects capital expenditures will rise to $266 million in fiscal 1999, and about 75 percent of that will be put into "capacity and information technology."
Schwab said that would be a 40 percent increase in capital spending from $190 million in 1998, and from $140 million the prior year.
"The significant increase in 1999 planned expenditures is primarily due to the company's plans to enhance its systems capacity," Schwab said in its 10-K filing.
The increased expenditures come against a backdrop of soaring earnings gains at Schwab. Two weeks ago, the brokerage said it expects to nearly double its earnings from a year ago.
The San Francisco-based company, the nation's largest discount broker, has ridden a wave of investor interest in online trading over the past year, one that has fueled a boom in its earnings.
But that soaring growth has been marked by one notable disadvantage: a surge of traffic that has forced it frequently to upgrade its systems.
Those upgrades have been accompanied intermittently by a series of system outages, causing investors to lose access to the trading systems -- and possibly losing money. That has drawn the suspicion of U.S. regulators.
Schwab has not been alone. Top rivals Ameritrade (AMTD) and E*Trade Group (EGRP) also have faced trading-system woes.
Shares of Schwab fell 1-5/8 to 94-1/4 in New York Stock Exchange trading on Tuesday.
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