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AT&T to Cut 5,000 More Jobs

January 05, 2002|ELIZABETH DOUGLASS | TIMES STAFF WRITER

Retrenching long-distance giant AT&T Corp. said Friday that it will cut 5,000 more jobs this year and take a $1-billion charge against fourth-quarter earnings to cover the cost of the cutbacks.

The new job cuts will hit AT&T's corporate staff as well as the phone company's two remaining telecommunications units--business services and consumer long-distance--which also took the brunt of the 5,100 layoffs the company announced last year.

Subtracting the staff at its cable unit, AT&T has about 80,000 employees in its corporate and two phone units, making the newly announced layoffs a 6% payroll cutback. A company spokeswoman said more than half the affected employees are in management positions.

The New York-based company's cable and broadband unit, with 40,000 employees, will not be affected by the new reductions. That business is being sold to Comcast Corp. for about $72 billion in a deal that was announced last month.

"The job cuts are part of AT&T's effort to reinvent itself after shedding its wireless and broadband businesses," said Jeff Kagan, an independent consultant in Atlanta. "The units that are left have to reduce costs and be streamlined to make them attractive to investors and to customers. If they weren't making these kinds of moves, I'd be worried."

AT&T's business and consumer telecommunications units, the only businesses left once broadband is gone, are suffering amid stepped-up competition and the trend toward using e-mail and mobile phones instead of traditional long-distance.

The two phone divisions produce steady income at healthy margins, but their revenue has been falling, and the trend may not reverse itself for a long time--if ever, analysts say.

Revenue at AT&T's consumer long-distance business, the hardest hit of the two phone units, has been falling by double-digits each quarter for more than a year and is expected to plunge by more than 20% this year.

With sales plummeting so fast, analysts believe AT&T has little choice but to keep slashing expenses to keep them in line with shrinking sales.

AT&T's business services unit has at least 4 million corporate customers, and its consumer unit remains the nation's largest long-distance company, with about 60 million residential customers.

Together, the two businesses have more than $44 billion in yearly sales.

Many in the industry doubt that AT&T can survive as an independent company once the cable business is gone. There is speculation that other phone companies, including former Baby Bell BellSouth Corp., could buy the weakened AT&T.

Company officials have rejected that notion, contending that the consumer long-distance business will be bolstered by the sale of lucrative add-on services such as Internet access and high-speed data connections.

AT&T executives say the business services unit will rebound now that a string of disappearing upstart companies has made corporations less willing to deviate from tried-and-true carriers.

Still, in October, AT&T executives warned that the telecommunications business was rapidly deteriorating and that the company planned to take an unspecified charge on its fourth-quarter results.

On Friday, AT&T said the $1-billion charge will cover severance and termination costs associated with the company's job cuts in 2001 and 2002, as well as charges for canceling contracts and closing buildings. About $250 million to $350 million of the charge will be in cash, according to Eileen Connolly, an AT&T spokeswoman.

The company's fourth-quarter results, which cover the three-month period that ended Dec. 31, will be released in the last week of January. Analysts polled by Thomson Financial/First Call estimate that AT&T would post a profit of 4 cents a share for the fourth quarter.

In the third quarter, the phone company's results were rocked by a noncash charge of $5.3 billion related to dissolution of Concert, the international telecommunications joint venture between AT&T and British Telecom.

Shares of AT&T closed at $18.37, down 27 cents, on the New York Stock Exchange.

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