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First Data's bottom line costs 50 jobs

Spokeswoman says layoffs are to help maximize profits

Spokeswoman says layoffs are to help maximize profits

December 20, 2005|by DANIEL J. SERNOVITZ

HAGERSTOWN

daniels@herald-mail.com

First Data Merchant Services in Hagerstown laid off about 50 workers without prior notice Friday, company spokeswoman Nancy Etheredge said in a telephone interview Monday.

The move was prompted by reduced third-quarter earnings within parent company First Data Corp.'s Card Issuing Services segment, Etheredge said.

Etheredge said the decision was not easy for company officials, coming just more than a week before Christmas, but was necessary to maximize profits and reduce expenses following a 4 percent drop in revenues with the company's Card Issuing Services segment during the three-month period ended Sept. 30.

"Of course, and decisions like this are always difficult to make," Etheredge said. "We're really looking to streamline operations and this initiative is aimed at reducing cost and increasing profit."

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When asked about the timing of the layoffs, Etheredge pointed to the retirement of CEO Charles T. Fote in late November and his replacement with Chief Executive Officer Henry C. Duques. She declined to elaborate.

During a conference call with investors Dec. 16, Duques characterized the layoffs as essential to the company's long-term survival in the highly competitive payment-solution industry. Aside from weakened performance in the card issuance segment, he said he is satisfied with the performance of the company's other divisions.

For the third quarter, First Data's Card Issuing Services segment reported revenue of $594 million, down from $620 million for the same three months in 2004. The segment's operating profit fell 25 percent, from $154 million in the third quarter of 2004 to $116 million this year.

Duques, who served as CEO of First Data from 1992-2002, said the layoffs were his decision rather than a decision made by Fote. First Data announced Fote's retirement and Duques' election in a release dated Nov. 28.

Duques, 62, said he expects additional announcements before the end of the company's fourth quarter, possibly including consolidation within First Data. He declined to limit changes to a specific segment or say whether the company's card services segment will be affected by those changes.

"We're looking at things that we can just totally eliminate from the company," he said.

When re-elected CEO of First Data, Duques said during the conference call, he determined: "Priority one, priority two, and priority three was the increase of shareholder value."

First Data laid off about 3 percent of its 32,000 workers worldwide, a majority of which came from the company's Card Issuing Services segment. Duques estimated the layoffs would result in a savings of between $50 million and $60 million. Etheredge said a majority of the Hagerstown facility's 2,000 workers are within First Data's Merchant Services segment.

Peter Thomas, executive director of the Western Maryland Consortium, which assists laid-off workers in finding new jobs, said he had only heard about the layoffs unofficially. He said the announcement comes at a difficult time of year for the region, following this past summer's closure of the GST AutoLeather plant in Williamsport and the pending closure of the Eastalco plant in Frederick.

Thomas said he met Monday with a group of about 15 workers at GST's corporate office in Hagerstown who expected to be laid off within the next month. Thomas said the consortium has taken on about 165 GST plant workers since July.

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