The New York-based investment bank and securities firm anticipates revenue of $345 million to $365 million for the fourth quarter, below Wall Street's consensus view of $390.9 million.
The stock, which closed Friday at $19.79, changed hands more than 8% lower in premarket action at $18.20.
The company said it experienced weak performances from its high yield and asset management businesses in the fourth quarter and it recorded losses in "two principal trading efforts." In addition, a number of deals were postponed because of market conditions, impacting the otherwise strong performance of its investment banking business.
Revenue from equities is expected to total $130 million in the quarter, while fixed income and commodities is anticipated to contribute $40 million. The company sees revenue of $175 million from investment banking activities and a negative revenue contribution of $6 million from asset management.
Citing the revenue shortfall as well the revenue mix, Jefferies said it expects to incur "significantly higher" compensation costs in the fourth quarter, resulting in the surprise loss.
As the extremely challenging environment that began in the summer continued in the fourth quarter, particularly in November and December, we took immediate and decisive action to address a number of issues, and improve efficiency and operating leverage, said Richard Handler, the company's Chairman and chief executive officer in a statement.
The company said the two trading accounts that lost money were shut down and that an undisclosed number of employees in that unit and other units were terminated.
In addition, both Handler and Brian Friedman, the chairman of Jefferies' executive committee, have asked the board's compensation committee to reduce their future compensation by the value of the number of shares both were granted in 2006. The pair also will not receive bonuses for 2007.
The company also said it's not seeking any third-party capital infusion.
For the year, Jefferies sees earnings of more than $140 million and revenue of more than $1.55 billion. Michael Baron mb/mb
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