Balance Sheet and Customer Segments

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What is DLJdirect’s financial situation?

Exhibit 16 of the document showed DLJdirect’s income statement from 1994-1999 (in millions). Exhibit 17 showed DLJdirect key financial and operating performance. The revenue increased steadily from 1994 to 1997. The revenue increase $50 million in 1998 which is equivalent to 43% increase. In 1999 the revenue increased about $44 million. The income was stable prior to 1997 when the company experienced a loss and able to recovered the next year in 1998. In 1999, the company reached the highest income because of the huge commission increase in that year. Overall, the company is making good progress over the years with steady increment of commissions, total trades, average daily trades, total accounts and total customer assets.

Does DLJdirect have the financial capability to address new segments, e.g. to do more advertising to attract new kinds of customers? DLJdirect does have the financial capability to address new segments in the market and increase advertising to attract new customers. However when compared to its competitors, they are spending more money on customer acquisition. For example, E*Trade customer acquisition budget was projected to be $300 million in 1999. That’s 50% less than DLJdirect’s total cost and expenses in 1999. For now, the company should build a steady and reliable reputation in the market before spending more money on advertising alone. Identify the ways DLJdirect’s trading service is differentiated from competitors Tiered services for accounts with high asset balances and speed of execution are the two ways DLJdirect differentiates itself from competitors. Customers with asset balance in excess of $100,000 are provided with access to DLJ research and greater access to DLK-manages IPOs. For customers who have more in $1 million or more assets, DLJdirect reduced certain fees, provided a personal service team, and offered more trading time. Exhibit 14 below shows the DLJdirect advantage in...
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