News

First Data cuts 740 jobs in '03's 3Q

October 19, 2003

DENVER - While First Data Corp. (NYSE: FDC) says it still expects to soon close a $7 billion acquisition of transaction processor Concord EFS (NYSE: CE),  it's also been restructuring and cutting jobs.

According to a report in the Denver Business Journal, Greenwood Village, Colo.-based First Data cut 740 jobs in 2003's third quarter.

During an Oct. 14 conference call discussing third-quarter results, Charles Fote, First Data's chairman and chief executive, said that earnings were hurt by a charge of 2 cents per share tied mainly to restructuring.

"Through these restructures we reduced headcount by 740 folks," Fote said. The company employs about 29,000 people worldwide.

Fote said that about half the cuts came in the company's credit and debit card issuing business, while the balance came in other parts of the company.

Spokeswoman Staci Busby noted in an e-mail after the call that the reductions were in September and weren't all layoffs, according to the Business Journal report.

Deutsche Bank Securities analyst Brandt Sakakeeny said in a note on Oct. 15 that First Data's card-issuing business posted third-quarter results that missed his expectations while the other First Data segments were in line with his forecast.

First Data has three main lines of business: payment services, which is made up mainly of Western Union money transfers; merchant services, which is made up mainly of processing credit card and debit card transactions for merchants, to whom First Data leases or sells point-of-sale terminals; and card-issuing services, which include card authorization, mailing out statements and printing the plastic cards themselves.

Card-issuing services posted third-quarter revenue of $492 million, which was up only 1.4 percent versus 2002 and down 3.3 percent versus the second quarter. Plus, third-quarter operating income of $72.7 million for the segment dropped $24.3 million, or 25.1 percent, versus a year ago.

In his note, Sakakeeny said that factors hurting segment results included the bankruptcy of a major customer, pricing concessions to another, and slower-than-expected growth in First Data's subprime portfolio of cards, which are issued to consumers with relatively weak credit histories.

Fote said in the conference call that the card-issuing segment has had a "major reduction in expenses," and conversions of a backlog of accounts are "back on track."

Fote also emphasized strong third-quarter growth in First Data's payment services and merchant services segments, according to the Business Journal.

Nevertheless, First Data shares dropped more than 6 percent Oct. 14 in the aftermath of the results and conference call.

First Data posted third-quarter earnings of $360.9 million, up 5 percent versus 2002; earnings per share of 49 cents, up 9 percent versus a year ago; and revenue of $2.14 billion, up 10 percent versus a year ago.