UPDATE 2-State Street to cut 6 pct of work force

(Adds details on company, charge)

By Svea Herbst-Bayliss

BOSTON, Dec 3 (Reuters) - State Street Corp (STT.N), one of the world's biggest institutional money managers, said on Wednesday it plans to lay off as many as 1,800 people, or 6 percent of its staff, in the first three months of 2009.

The layoffs will cost the company between $325 million and $350 million, but will ultimately translate into annual savings of as much as $400 million, the company said.

State Street, which also earns fees for providing investors with a range of services that include calculating the bulk of mutual fund prices printed in newspapers, will reduce its staff by consolidating middle and senior management ranks. The bulk of layoffs are expected in North America.

Like other money managers paring staff, State Street has seen assets under management shrivel as financial markets have tumbled in the last months. Fidelity Investments, Legg Mason Inc (LM.N) and Janus Capital Group Inc (JNS.N) have all said they plan to cut staff.

State Street Chairman and Chief Executive Ronald Logue said the cuts will allow the company to continue delivering consistent earnings growth.

The company, which reported a 33 percent gain in third-quarter earnings of $477 million, or $1.09 a share, said it expects operating earnings for the full year to be at the high end of a range between 10 percent and 15 percent.

Next year, it sees operating earnings at the low end of that range, the company said.

State Street has already told investors it may have to take a charge in the fourth quarter and has set aside $450 million before taxes this quarter if it decides to assist some funds managed at its State Stet Global Advisors unit.

The cost for the layoffs will likely translate into a charge of between 51 cents and 55 cents a share.

Investors have long expressed concern about unrealized losses that State Street has in its off-balance sheet commercial paper, or conduit program.

State Street's share price closed down 1 percent at $36.60 on the New York Stock Exchange on Wednesday, leaving it down 55 percent since January. That's slightly more than the 53 percent drop in the 16-member Standard & Poor's Supercomposite Asset Management & Custody Banks Index. (Reporting by Svea Herbst-Bayliss; editing by Jeffrey Benkoe)