T. Rowe Price cuts 5% of force

About 180 affected as mutual fund firm tries to revive profits

Fewer phones ringing

November 03, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

T. Rowe Price Group Inc., which two weeks ago reported dismal third-quarter profits, said yesterday that it has eliminated 5 percent of its U.S. work force, or about 180 positions.

The cuts, effective immediately, are the biggest in the company's 64-year history and affected mainly those employed in the firm's telephone and information technology groups in Baltimore and Owings Mills.

The workers dismissed were notified Thursday, and the company announced the layoffs to other employees yesterday. T. Rowe Price said it is offering severance packages, though it declined to disclose the specifics, and will assist workers in searching for new jobs.

"Reducing staff levels was a very difficult decision and one that was not taken quickly or lightly within our organization," said George A. Roche, chairman and president of the Baltimore-based mutual fund company.

T. Rowe Price reported Oct. 19 that profit in the third quarter fell 27 percent to $50 million, and revenue declined 20 percent to $243.6 million.

Skittish investors and a tanking stock market also pushed the firm's assets under management down 22 percent to $140.4 billion.

Roche said at the time that layoffs might be in order.

"T. Rowe is not doing anything against the grain here," John A. Hall, an analyst at Prudential Financial in New York, said yesterday. "The business environment is such that the equity markets have gone down and that has reduced the level of revenue companies have, and with lower revenue you've got to bring down cost structures."

He noted that Fidelity Investments cut 760 jobs this week - 2.3 percent of its work force.

Price officials would not say whether more positions will be eliminated.

The company will "continue to review all of our costs," not only personnel, but advertising, equipment and other areas, Roche said. "Basically, we are looking at costs in all areas."

The cuts come on top of the 55 that were announced in April - mainly in the Owings Mills phone group. Between those cuts and reductions through attrition, the company's U.S. work force has dropped to just over 3,400 from about 3,800 a year ago.

The cuts closely track the drop-off in customer-service demands, the company said: The number of calls coming in from investors fell by nearly a third in the first 10 months of the year.

"That pretty well tells you that you don't need the same level of staffing that you had a year ago," said Steven E. Norwitz, spokesman for Price.

The company recently wrapped up some large technology-driven projects, such as setting up trading functions in its London offices after the $783 million acquisition in August of the remaining 50 percent interest in Rowe Price-Fleming International from its British partner Robert Fleming Holdings Ltd.

Now that many projects are finished, Price has put off other technology-based initiatives - which meant fewer information technology workers were needed.

Norwitz said that none of the company's money managers or analysts had been laid off.

"We do not anticipate that this move will affect in any way either the investment management of [investors'] assets or the service they're provided," he said. "None of the investment portfolio managers are included in this."

In fact, the company said that, despite the elimination of the 180 positions, it still plans to hire more people to help with its growing business of selling mutual funds through third parties, such as insurance companies, banks and annuities.

"That has been a big growth area for the firm over the past five years," Norwitz said.

Given the conditions that Price is facing, the company made the right move with the cuts, Hall said.

"They're running the business knowing where they have overcapacity and undercapacity," Hall explained. "From a portfolio management standpoint, the challenges are consistent across markets."

Price shares rose 66 cents yesterday to close at $27.96.

Sun staff writer Bill Atkinson contributed to this article.

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