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Web brokers deliver upside surprises

Web brokers E*Trade Group (Nasdaq: EGRP) and DLJdirect (NYSE: DIR) reported upside surprises Wednesday, while Knight-Trimark (Nasdaq: NITE), which clears trades for online brokers, reported a better-than-expected profit.

The results aren't terribly surprising given the volatility and record volume on the Nasdaq and New York Stock Exchange. On Tuesday, Charles Schwab (NYSE: SCH) topped estimates.

E*Trade reported fiscal first quarter sales of $246 million, up 112 percent from $116 million for the same period a year ago, and up 42 percent from $173 million in the fourth quarter a year ago.

The Web broker reported a loss from ongoing operations of $38.1 million, or 15 cents a share, which topped estimates. Including one-time items, E*Trade lost 2 cents a share. The broker recorded a charge of 2 cents a share related to acquisitions and one-time gains from investments of 8 cents a share. E*Trade also brought in 7 cents a share related to its venture investments.

E*Trade said its sales were helped along by strong volume and asset growth. The broker said it acquired 330,000 net new accounts during the first quarter, bringing its total active accounts to nearly 1.9 million. Average transactions per day increased to 133,000, up 208 percent from 43,000 a year ago, and 65 percent from 80,000 in the fourth quarter. Assets held in customer accounts as of Dec. 31, were $44 billion.

E*Trade also said it doubled advertising revenue booked in the quarter. Total page views in the quarter were 891 million, up 239 percent from 263 million in the same quarter a year ago and up 30 percent from 686 million in the fourth quarter. E*Trade recently closed its acquisition of Telebanc, which has $2.6 billion in customer deposits.

DLJdirect also benefited from increased trading volume.

DLJdirect said fourth quarter revenue more than doubled to a record $76.3 million, compared to $35.4 million a year ago and $54.9 million in the third quarter.

The online broker reported a loss of $2.0 million, or 2 cents a share for the quarter, 4 cents ahead of First Call consensus estimates. In the fourth quarter a year ago, DLJdirect reported a profit of 2 cents a share.

As of Dec. 31, DLJdirect had 795,000 global customer accounts, 50 percent more than a year ago. Active customer accounts at the end of 1999 were 347,000 with assets totaling $21.7 billion.

Average daily trades totaled 30,500 for the quarter, up 57 percent compared to the third quarter. In addition, 40,000 net new active accounts were added, said DLJdirect.

Although DLJdirect and E*Trade saw gains in the increased trading volume in November and December, Knight-Trimark was raking in profits.

Knight-Trimark, a market maker for online brokers, reported fourth quarter sales of $256.4 million and a profit of $58.4 million, or 50 cents a share. The results beat First Call consensus by a dime.

One-time expenses incurred in connection with the company's acquisition of Arbitrade Holdings LLC, an options market maker and asset manager, reduced earnings by 4 cents a share, said Knight-Trimark.

"Market conditions of orderly volatility and high volume in the fourth quarter presented an ideal environment for our business model," said Kenneth D. Pasternak, CEO in a statement. "We executed 470,000 trades per day on average, a 47 percent increase from the previous quarter and a 118 percent gain from the fourth quarter 1998."

"We foresee continued, dramatic growth in the need for Knight's range of services from online firms, national full-service brokers and our growing institutional base," said Pasternak.