Ameritrade Posts Loss on Writedown

Excluding the item, the online brokerage matches analysts' forecasts.
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Updated from 10:03 a.m. EDT

Online broker

Ameritrade

(AMTD) - Get Report

posted a quarterly loss of $45.7 million, even as it met Wall Street's diminished expectations for earnings from ongoing operations.

The company also set a range for expected 2003 earnings that implied it might struggle to hit existing estimates.

The fourth-quarter loss was expected following an earnings warning from the Omaha, Neb.-based brokerage favored by fast-fingered online investors. The 17-cent loss was attributable to a 21-cent writedown of its TradeCast division, an operating unit that caters to daytraders, which Ameritrade is trying to sell.

When Ameritrade purchased TradeCast nearly two years ago, it was supposed to help revolutionize its daytrading technology. But the company decided it could do without TradeCast after aquiring Datek Online earlier this year. Datek, another brokerage favored by daytraders, had been one of the nation's largest online brokers.

On an operating basis, Ameritrade posted a profit of $9.7 million, or 4 cents a share, which was in line with the Thomson Financial/First Call consensus estimate.

For fiscal-year 2002, Ameritrade earned 12 cents a share on an operating basis, according to First Call. But it posted a loss of 13 cents a share, or $28.9 million, according to traditional accounting rules.

In the fourth quarter, the company recorded a 25% year-over-year increase in net revenue to $115 million, largely due to a jump in trading commission and other fees.

Looking ahead, company officials said on a conference call that 2003 earnings could be anywhere from 24 cents to 32 cents a share. Analysts polled by First Call were looking for 32 cents. Ameritrade officials also said they intend to ramp up spending on advertising and marketing, despite the market slump, in a bid to get new customers and retain the ones they have. Other online brokers have been cutting spending.

In early trading Thursday, shares of Ameritrade were trading slightly higher, rising 8 cents, or 1.6%, to $4.89.

Ameritrade Chief Executive Joseph Moglia said the company's decision to begin spending again on advertising is part of an aggressive strategy to increase market share, even though he concedes that many retail investors are still on the market sidelines.

"We're trying to portray ourselves as the champion of the individual investor," said Moglia.

He said the new ad campaign, on which the company intends to spend between $115 million and $150 million, will emphasize the broker's fast-execution of trades and wide array of online trading tools. In the just completed fiscal year, the brokerage spent $61 million on advertising, nearly half of what it spent in the prior year.

Moglia, however, said the company is prepared to scale back its ad campaign if the market doesn't pick up and revenues from trading commissions weaken.

Ameritrade expects to find a buyer for TradeCast by the end of December. And Moglia said the company, in taking the $63 million write-down, is assuming "the worst case scenario" and doesn't foresee any additional charges in conjunction with that sale in the first-quarter of 2003.

Currently, Ameritrade's stock trades at a price/earnings multiple of 40 on an operating basis.

Ameritrade's stock, down about 19% for the year, is trading well below its $60 a share high-water mark, set back during the height of the online trading craze during the bull market.

Earlier this month,

E*Trade

(ET) - Get Report

, one of Ameritrade's main rivals, reported net income of $20.7 million, or 6 cents a share, compared with a loss of $259 million, or 72 cents a share, in the year-earlier period. Much of that growth was due to E*Trade's online bank.