Posted on: Friday, October 8, 2004
AT&T to pare 12,500 workers
By Bruce Meyerson
Associated Press
NEW YORK — AT&T Corp. is cutting at least 7,500 more jobs and slashing the book value of its assets by $11.4 billion, drastic moves prompted by the company's plan to retreat from the traditional consumer telephone business after a lost court battle.
The company said yesterday that it now plans to shrink its workforce by more than a fifth, or about 12,500 jobs, during 2004 — up from a previous target of about 4,900 jobs.
Most of the jobs cuts are layoffs. About 9,000 of the people affected already have left the company or been notified. AT&T now expects to finish the year with about 49,000 workers, down from nearly 62,000 at the start of 2004.
In Hawai'i, AT&T laid off 72 employees at its call center in One Waterfront Plaza in July. AT&T said recently it will layoff the remaining 86 workers at the call center Nov. 19 and close the facility.
Severance costs and other expenses related to the job cuts will reduce third-quarter earnings by $1.1 billion, the company said.
The asset writedown of $11.4 billion — about a quarter of the company's assets — reflects the reduced value of AT&T's network now that it will be carrying less consumer voice traffic. It will be charged against earnings in the third quarter.
While the writedown is an acknowledgment that AT&T wasted billions of dollars upgrading its network and marketing to consumers, the sharply reduced value of the company's assets will mean tremendous savings on paper in terms of depreciation expense.
To begin with, AT&T said, the writedown will reduce depreciation expense by about $1 billion in the second half of 2004.
Depreciation is an accounting method that reflects how wear and tear reduces the worth of property and equipment. An estimated share of an asset's value is subtracted from earnings with every passing quarter.
Because AT&T's assets will be worth $11.4 billion less, the quarterly value lost to wear and tear falls.
The announcement came after the close of yesterday's regular stock trading. But shares of AT&T, which had slipped 16 cents to $15.04 on the New York Stock Exchange, climbed 2.5 percent in after-hours trading, or 38 cents, to $15.42.
Many analysts have speculated that AT&T will make itself a more attractive takeover candidate by cleaning up its books and reducing depreciation expense. Talks to be acquired by former subsidiary BellSouth Corp. collapsed earlier this year.
AT&T, still the nation's biggest long-distance carrier with about 30 million customers, announced in July that it would no longer spend money to sell long-distance or local service to consumers. The company is still spending aggressively to sign up homes for its new Internet-based phone service.
The withdrawal from the traditional phone business came after a federal court decision that will make it more expensive for AT&T to sell local service by leasing residential lines from the four regional Bells — who at the same time are luring away AT&T's long-distance customers.
