Schwab sells division to UBS for $265 million

SAN FRANCISCO (AP) — Backpedaling from a recent expansion, Charles Schwab Corp. is selling an institutional investment and research division to Swiss banking giant UBS AG for $265 million, another step in the struggling stock brokerage's push to regain its Main Street appeal.

The all-cash deal, announced Tuesday, represents a humbling about-face for San Francisco-based Schwab, which will sustain a substantial loss on the sale of its SoundView Capital Markets group.

UBS hopes to use the acquisition as a springboard toward becoming one of the top traders on the Nasdaq Stock Market. The deal, which affects about 500 Schwab employees, is expected to be completed by year's end.

Schwab is exiting the capital markets business less than eight months after completing a $340 million acquisition of SoundView Technology Group that was supposed to spruce up the operations. At the time, Schwab's management believed the SoundView deal would help broaden the company's reach beyond the mainstream investment audience that made its brokerage a household name.

But Schwab has recently had a change of heart about its diversification efforts, which was provoked by an earnings funk that has kept the company's stock price in a deep slump.

Schwab is now trying to sharpen its focus on individual investors by cutting prices and reducing expenses in a bid to recapture some of the ground that it has lost to nimble online rivals such as E-Trade Financial Corp. and Ameritrade Holding Corp.

The shake-up prompted Schwab's board to oust David Pottruck as the company's chief executive in July. With company founder Charles R. Schwab back at the helm, the brokerage is retracing Pottruck's perceived missteps and trying to repair the damage.

"This (sale) is a clear admission that the SoundView acquisition wasn't well thought out," said analyst Matthew Snowling of Friedman, Billings, Ramsey & Co. "The strategy was doomed from the beginning."