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Tickers in this Article: C
On Monday, it was reported that Citigroup (NYSE: C) executives are considering laying off as many as 15,000 employees and taking a charge in excess of $1 billion in related severance costs.

Why Make Job Cuts Now? The Saudi Connection!
Frankly, if I were Citi I would have taken a charge in the fourth quarter of 2006. That way, the 2007 results would have looked pure as the driven snow.

That said, Citi is under an awful lot of pressure to reduce their operating expenses which have been growing at a faster clip than revenues over the past year.

And among those applying pressure is a gentleman by the name of Prince Alwaleed bin Talal, who has about a 4% stake in the company.

For those that haven't heard of Alwaleed, he's a self-made Saudi billionaire with a penchant for investing in the stock of a variety of companies and industries.

He's also flamboyant, likes to live the good life, and is considered to be one heck of shrewd investor. Odds are you've seen him on one of those "Lifestyles of the Rich and Famous" type shows. He's also been featured on various Forbes lists of the world's wealthiest people. He is, after all, the world's fifth richest person.

In any case, Alwaleed has been pretty vocal about the company's need to cut costs. Last July, he told Reuters of his dissatisfaction, saying that the company needs to take "draconian" measures to control costs.

He also specifically said, with regard to the company's efforts to get its cost structure under control, "I'm patient, but enough is enough."

For what it's worth, Citi has tried to appease Alwaleed on several occasions. The most recent being when Citi's chief executive Charles Prince made the trek to Saudi Arabia (earlier this year) to discuss the company's 2006 performance. But while I think that Alwaleed appreciated the visit (at least his comments afterward suggested that), word on the street has it that he wants management to take action -- now!

Enter the Talk of Job Cuts
To be clear, the company has plenty of room to trim costs. After all, it employs north of 300,000 people. It could easily knock out 5% of the workforce by eliminating deadwood at any of its more than 8000 branches worldwide.

It could also choose not to rehire the thousands upon thousands of employees that leave the company (during the normal course of business) each year.

Other Potential Cost Cutting:
Then there's the company's executive pay structure. Surely Citi can save a few bucks there!

For example, in 2006 Prince walked away with a more than $13 million bonus. And collectively, the rest of the senior executive team pocketed more than $27 million in bonuses on top of what I can assure you are generous base salaries, and handsome stock option awards.

And this says nothing of the more than $500,000 it plunked down to shuttle top execs on plush aircraft, or the countless dollars being spent on the company's pension plan.

In short, there's plenty of room for the company to take some costs out of the equation. All it has to do is act. Seriously folks, even if it stopped (just for a year) doling out millions upon millions to build out new branches, and upgrading technology, it could seriously boost its bottom line.

Anyway, shareholders (I think) can thank Alwaleed for holding management's feet to the fire and making them realize that they need to cut costs now.


The Risks

Of course, potential investors need to understand that the story at Citi has some risk in it. Keep in mind that the company is big in credit cards, and lending. Therefore, a slowing U.S. economy could be a serious drag on future earnings.

And while Citi is one of the more diversified "financials" (it operates in about 100 countries), many of its overseas clients have substantial holdings in the U.S., which could be adversely affected in a U.S. economic slowdown. In short, its overseas operations aren't quite as insulated as some might think.

The Bottom Line
The company has plenty of room to trim costs. Now it's up to management to get off its collective rears and to do something about it. Fact is, if management can take even a couple of percentage points out of operating costs in 2007, I think that the stock could have some serious upside.

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