Similar but more detailed account:
Fidelity to cut nearly 1,300 jobs
Thursday November 6, 2:56 pm ET
By Mark Jewell, AP Business Writer
Fidelity Investments to cut nearly 1,300 jobs; second round of unspecified cuts coming
BOSTON (AP) -- Fidelity Investments said Thursday it will cut nearly 1,300 jobs this month, and more layoffs are coming early next year in response to declining markets that have eroded mutual fund assets, along with the fees Fidelity earns from its core business.
Layoff notices will go out later this month to about 2.9 percent of Fidelity's overall work force of 44,400. The cuts will be spread across the company's far-flung U.S. operations, affecting management positions as well as lower-level jobs, said Anne Crowley, a spokeswoman for Boston-based, privately held Fidelity.
A second rounds of layoffs is planned in the first three months of next year, with the number of those cuts and other details to be released in coming weeks.
Crowley declined to offer specifics, but said both rounds of cuts will cumulatively affect fewer than 4,000 jobs -- a figure that had circulated recently in media accounts.
In a letter distributed to Fidelity employees Thursday, Fidelity President Rodger Lawson said recent market volatility has hurt company revenue and "has led me to conclude that many of the cost improvement plans which would have been phased in by our business units over the next three years need to be accelerated."
Crowley said the cuts are being made "based on decisions by individual business leaders on what their needs are. Most of them are doing some layoffs in their divisions."
In addition to its Massachusetts operations in Boston and Marlborough, Fidelity has significant operations in Florida, Kentucky, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Rhode Island, Texas and Utah.
The first round of cuts will be roughly proportionate at those locations, or around 2.9 percent, Crowley said.
The cuts are in addition to reductions totaling about 800 jobs in two rounds earlier this year after Fidelity reorganized some business units. Those reductions came largely in Fidelity's personal and workplace investing operations that oversee other companies' pensions and 401(k) plans.
Reeling markets made Fidelity's more than 400 mutual funds targets for jobs cuts as well. According to Financial Research Corp., assets at Fidelity's funds had lost nearly 23 percent of their value through October of this year, to nearly $717 billion. The total excludes money-market funds, an area in which Fidelity is the industry leader based on more than $400 billion in assets. Overall, Fidelity managed $1.4 trillion as of Sept. 30.
"All of our mutual fund competitors are experiencing the same type of declines," Crowley said. "We have a strength many of our competitors don't have: We have a huge money-market operation, and those funds have been attracting new customers and new assets over the last several months."
But money-market funds don't generate as much fee revenue as mutual funds, and the FRC data show this year's drop in mutual fund assets at Fidelity has been steeper than at rivals Vanguard Group and Capital Group's American Funds.
"Fidelity's business model is based on assets under management, and the fees they generate," said Jim Lowell, a former Fidelity employee who runs the independent newsletter Fidelity Investor.
Fidelity has sought to diversify beyond its core mutual funds in recent years, moving into areas such as individual retirement planning and employee benefit management.
With market turmoil reducing money-management profit opportunities, Fidelity "could gain market share on a competitor like Vanguard that's less diversified, and relies heavily on index funds," Lowell said.
Fidelity shed about 7 percent of its jobs after technology stocks tanked early this decade, Lowell said. But within a couple years, Fidelity returned to the employment level it had before the tech bubble burst, and eventually surpassed it, largely because of the success of diversification, Lowell said.
Lawson was brought on board at Fidelity in the summer of 2007 in part to cut expenses, and last fall distributed a memo informing employees that he intended to aggressively control costs.
With Lawson's hiring, Fidelity "was already on a course to trim some significant overgrowth," Lowell said. "So these cuts today were already on the table even before the cataclysmic events in the market took place recently."
May your heart always be joyful.
| May your song always be sung.
| May you stay forever young.
| ----Bob Dylan