Packer's Ecorp Abandons Online Broker Schwab
Sydney Morning Herald
Saturday December 1, 2001
Charles Schwab's presence in the Australian online broker market is in jeopardy after Kerry Packer's Internet investment company, ecorp, walked away from the joint venture officially launched just 12 months ago.
Schwab, America's premier online broker, has struggled to find a foothold in the already overserviced online market and last year the joint venture with ecorp lost $12.9 million.
Speculation about its future in the Australian market has been rife for months as ecorp executives have cast about for potential buyers. Yesterday, ecorp revealed it had sold its 50 per cent stake back to the broker's US parent for an undisclosed sum, believed to be below $1 million.
Schwab consistently has refused to release subscriber numbers and ecorp's withdrawal from the joint venture has heightened speculation about its future.
A spokeswoman for Schwab said the company ``was continuing to review options".
Ecorp, which pushed its fully owned brokerage Sharetrade into the joint venture in February 2000, said it was disappointed with the performance of the online broker.
The group said the sale would result in a non-recurring charge of about $12 million for capital and operating losses in fiscal 2002.
Alison Deans, chief executive officer of ecorp, said: ``Whilst this outcome is clearly disappointing, we believe that the best outcome for our shareholders is for ecorp to exit the joint venture.
``Although the business has undergone a restructuring over the past 12 months including cost cutting and staff redundancies its bottom line performance has remained below expectations set at the formation of the joint venture in December 1999.
``Going forward, we will focus on the strong performance and potential of ecorp's five other business investments as the company tracks to profitability and positive cash flow in fiscal 2003."
A spokesman for the group added that a return to the online market looked unlikely at this stage.
Online broking has struggled to return to the glory days of the dot com boom experienced two years ago and many other, more established players, such as Commonwealth Securities, have had to make cuts as trading volumes continue to wane.
Industry insiders believe that Charles Schwab banked too heavily on its international renown to corner the Australian market. The tech wreck and a price war left Schwab struggling to find its niche in the market.
Marketing itself as a broader financial services provider and educator also failed to ignite interest from the retail investor.
CommSec, which is part of the Commonwealth Bank group, is the only broker believed to be making a profit.
E*Trade Australia, which holds the number two position in the market, reported a $33.5 million net loss for the year to June 30 while Sanford Securities lost $54.6 million.
The $12.9 million loss by Charles Schwab Australia pushed out ecorp's operating loss after tax to $31.9 million.
© 2001 Sydney Morning Herald
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