Charles Schwab Corp - Bear Market Led To Cutbacks, 2001

BEAR MARKET LED TO CUTBACKS (2001)

Schwab had doubled its workforce to 25,500 full-time employees during the bull market surge from 1998 through the end of 2000. When stocks tumbled in February 2001, the company announced plans to cut 11 to 13 percent of its workforce in the second quarter, including 2,000 to 2,300 employees who would be laid off and another 600 to 900 who would leave through attrition. In February 2001, Schwab's clients lost a combined $83.4 billion as the total value of client assets dropped to $845 billion. The average account balance sank to $111,000 from a peak of about $137,400 in August 2000. Trading volume was down about one-third from the same month the previous year.

While Schwab remains the leading online brokerage firm with an estimated 22 percent of all Internet trades, investors perceive it as a well-diversified financial services firm. Its branch office network makes it a "click-and-mortar" type of company, and the acquisition of U.S. Trust helped to diversify its revenue sources. As a result, the company is not as dependent on online trading for its continued success as other pure-play online brokerages.