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Having posted Morningstar's pan of SCH, I thought I'd check out Schwab's cut price competitors to understand how successful Ameritrade (AMTD) or E*Trade (ET) are as a threat to Schwab.

Frankly I am underwhelmed.

Revenues :
'01 SCH revenues were twice that of AMTD and ET combined. At their 2000 peak, SCH revenues were 4 times that of AMTD+ET! In other words, between 2000 and 2001 SCH has lost more revenue ($1.858B) than AMTD+ET gained in two years since 1999 ($1.565B),SCH,ET&cmetric=rev&rmm=inc&rmm=rev

Earnings : Never mind.

If you want to see financial flatlining in action check out this graph of AMTD and ET earnings - they're terminal :,SCH,ET&cmetric=rev&rmm=inc&rhs=log&rhs=lin

SCH posted positive earnings every year since 1992 - and has cumulatively earned $2B since 1997
AMTD posted positive earnings in 4 out of 6 years reported - and cumulatively lost $79MM since 1997
ET posted positive earnings in 3 out of 7 years reported and cumulatively lost $293MM since 1997

Cash flow : Same story,SCH,ET&cmetric=rev&rmm=inc&rmm=csf

Leverage :
SCH has held steady in a range of 0.20 - 0.30 since '97
AMTD went from 0 in '97 to a high of 1.04 in 2000 - and is down to 0.19 in '01
ET is testing a new high of 3.18 in '01 from 0 in '97 to '99,SCH,ET&cmetric=rev&rmm=csf&cmetric=health

SCH has dropped dramatically in '01 while AMTD and ET happily wallow in negative territory,SCH,ET&cmetric=mgmt&rmm=csf&hmm=ld2e&mgmm=roic&mgmm=roe

Of course, AMTD and ET are cheaper for traders. Now if just being cheaper is the main criterion for future profitable growth, then surely they are serious competitive threats to Schwab. Unfortunately, life is not that simple. For long term survival, management needs to be able to run a business profitably - consistently. More so when times are tough - that's when real management quality shines through.

By whatever measure you choose, AMTD and ET management are yet to show they can do that. Q.E.D.

Or should I say R.I.P.?

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