Fidelity will eliminate 1,300 jobs

Fund giant plans to reduce staff 3% this month

Battered by the weakening economy and falling stock markets, Fidelity Investments yesterday confirmed it will begin the first of two rounds of job cuts, laying off about 1,300 people this month from the Boston mutual fund giant.

This month's layoffs will represent about 3 percent of Fidelity's total workforce of 44,400, spokeswoman Anne Crowley said. Fidelity employs about 11,500 people in Massachusetts, and Crowley said the layoffs would be "roughly proportional" across its US and global operations. If so, 3 percent of the Massachusetts workforce would be 345 positions. It also has about 5,400 employees in New Hampshire and about 2,400 employees in Rhode Island.

One focus of the cuts will be company managers, Fidelity president Rodger A. Lawson wrote in a memo to employees yesterday. He did not specify which departments would be targeted for the reductions.

Fidelity will follow with a second layoff in the first quarter of next year, Crowley said, with details of it still to be finalized.

Privately held Fidelity is just one of many financial firms whose performance has lagged lately, with several publicly traded investment managers recently announcing layoffs, including Janus Capital Group of Denver and Legg Mason Inc. of Baltimore.

Last week, Pennsylvania forecasting firm Moody's Economy.com predicted Massachusetts would lose 7,200 financial and insurance jobs alone through the end of 2009, or 4 percent of total employment in the sector.

In his memo, Lawson said "difficult times" in financial markets and the economy have "resulted in a significant negative effect" on Fidelity's revenue.

"Reluctantly, this has led me to conclude that many of the cost improvement plans which would have been phased in by our business units over the next three years need to be accelerated," Lawson wrote.

"At times like this it is critical to maintain the strong financial status of the company while also ensuring we continue to provide our clients with the best products and services available in the industry," he wrote.

With fewer managers, Lawson added, "this simplification of our organization also will help us address the speed-to-market concerns which have been a major focus for us all."

Crowley said the two rounds of layoffs would result in fewer than the 4,000 total job cuts that news reports last week indicated the company was considering. No fund managers or analysts would be affected by the cuts, she added.

One of the state's largest employers, Fidelity has been battered along with other financial firms by steep losses in the global financial markets. The reduction in total assets under management in turn reduces the amount they collect in management fees.

The recent developments are also an abrupt reversal for Fidelity, which reported a profit of $478 million on revenue of $3.8 billion for the first quarter of this year, according to Moody's Investors Service. That performance put the company on pace to exceed its 2007 performance.

Now, with markets down more than 30 percent, Eric Kobren, editor of a newsletter for Fidelity investors, estimated the company's revenue could be down by $1 billion or more this year.

Kobren also noted that investors have transferred about $250 million out of Fidelity stock funds and into its money-market funds, which generate less revenue for the firm.

James Lowell, who edits a rival newsletter for investors, also said he expects a sharp decline in Fidelity revenue, paced by the market's decline. "The market went from a peak last October to a spectacular trough this October," he said.

Fidelity's big operations in low-margin areas like retirement services could provide a bulwark against the losses related to investment activity, Lowell said. That may mean Fidelity is under less pressure than other asset managers of similar scale that are more dependent on income from financial markets.

Ross Kerber can be reached at kerber@globe.com.