Reuters axes 300 jobs in $100m Instinet cost cuts

Reuters shares fell 7 per cent yesterday when its 63 per cent-owned Instinet electronic trading division announced it was cutting 300 jobs as the downturn in financial markets continues. The cuts are equivalent to 17 per cent of the total workforce and will include job losses in the UK.

The move is part of a plan to reduce operating costs by $100m (£63.7m) on an annualised basis by the end of 2003. Instinet will take total charges of $73m to cover the cost of the redundancy programme as well as property write-downs. The rationalisation follows the acquisition of the rival Island trading platform for $364m in September.

Reuters has been hit by a sharp downturn in orders from beleaguered investment banks as well as fierce competition from rival trading screens such as Bloomberg.

The bear market in worldwide equities has forced Instinet to cut fees paid by institutional traders in a bid to increase trading volumes on its system, which faces new competition from Nasdaq's recently launched SuperMontage system.

"It's a tough market in general," said John Fay, Instinet's chief financial officer. "We've been affected by an overall decline in market volume and competition from other marketplaces."

Reuters' shares fell 16.75p to 218.75p as its joint house broker, Cazenove, cut its recommendation on the shares to "hold" from "long-term buy".

"Our analysis suggests that the headcount reduction now seen in the industry is significantly worse than that of the early 1990s and getting close to that of 1973-1974," Cazenove said, adding that there was unlikely to be a recovery in staff numbers before the fourth quarter of next year. The broker kept its profit forecast unchanged.

Instinet's restructuring is part of sweeping cost-cutting throughout Reuters as the group attempts to adjust to more straitened times.

Instinet will take a $58m charge in the fourth quarter of the current year and an additional $15m over the first three quarters of 2003.

Instinet and Island will have cut a combined 848 jobs this year. The combined workforce will be reduced to 1,423 at the end of the year from 2,271 at the end of 2001.