(By Salman - iStockAnalyst Writer)
Legg Mason Inc. (
) is a global asset management firm and provides investment management and related services to institutional and individual clients, company-sponsored mutual funds and other investment vehicles. The company offers these products and services directly and through various financial intermediaries. It operates principally in the United States of America and the United Kingdom and also has offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain and Taiwan.
Shares of the company have gained in past few sessions on media reports that billionaire investor Nelson Peltz, has acquired a stake in the fund manager and may push for a sale or breakup.
Legg Mason has suffered a crushing blow due to the current economic downturn. Its operating revenues primarily consist of investment advisory fees, from separate accounts and funds, and distribution and service fees. Early in May, Legg Mason reported its fifth straight quarterly losses.Fourth quarter net losses totaled $325 million or $2.29 compared to a loss of $255.4 million, or $1.81 a share. Quarterly revenue at the firm plunged to $617.2 million, down from $1.07 billion in the same period of 2008. Assets under management at the end of the latest quarter fell 9% to $632.4 billion, from $698.2 billion under management on Dec. 31, and 33% lower than on March 31, 2008. The firm saw $43.5 billion of net outflows in the three months ending March 31.
Legg Mason realized significant capital losses in the quarter primarily driven by the final resolution of its SIV exposure. In a statement, Legg Mason highlighted four events in the latest quarter: the $367.4 million cost of disposing of its structured investment vehicle debt, non-cash impairment charges on intangible assets of $82.9 million, a charge of $38.2 million for real estate lease losses and tax benefits of $102 million. In addition, it incurred real estate losses reflective of expected delays in sub letting vacant space and declining sub lease rental rates, principally in New York City where commercial real estate rates nose dived since December 31. The charges total $38 million, $24 million after tax or $0.17 per diluted share.
The struggling asset manager has been particularly hit hard by its exposure to structured investment vehicle debt. Though the company has got rid of its exposure to SIVs, concerns about Legg Mason's debts and its business outlook in difficult markets still persists. Moreover, the elimination of SIVs has come at a steep cost.
The year
2008 turned out to be a nightmare for the company.
