The firm intends to reduce its headcount from year-end levels by approximately 4,000 employees, or 10% excluding financial and investment associates.

Cost savings from this reduction are expected to be approximately $800 million on an annualized basis, including approximately $600 million for the remainder of 2008. As a result, the firm expects to record a restructuring charge of approximately $350 million in the 2008 second quarter.

Merrill may be forced to raise more capital

Merrill said that it has liquidity of $82 billion after recent issuance of stock sale and convertible preferred stock.

Merrill issued 36.7 million shares of common stock for $1.8 billion in January 2008 as well as an additional 12.5 million shares for $0.6 billion in February 2008 in connection with equity investments from Temasek Holdings, sovereign fund of Singapore.

In addition, Merrill issued 66,000 shares of 9% mandatory convertible preferred stock for an aggregate purchase price of $6.6 billion to investors including the Korea Investment Corporation, Kuwait Investment Authority and Mizuho Corporate Bank. These private placements reflect up to 126 million shares of common stock, if and when converted.

At the end of the first quarter, book value per share was $25.93, down from $29.34 at the end of 2007. Adjusting for the company’s $6.6 billion mandatory convertible preferred offering on a fully diluted basis, Merrill Lynch’s adjusted book value per share was $28.93 at the end of the first quarter of 2008.