AT&T Cuts Expand By 7,500 Jobs
Posted on: Monday, 11 October 2004, 06:00 CDT
AT&T Corp. is cutting about 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 following a lost court battle.
The company announced Thursday that it now plans to shrink its work force by a fifth, or about 12,500 jobs, during 2004 -- up from a previous target of about 4,900 jobs.
About 9,000 of the people affected have already 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.
The impact on Cincinnati workers is unclear. "At this time we do not know the effect of the workforce reductions on our employees in Cincinnati," said Mike Pruyn, a spokesman for the company in its Chicago office.
Pruyn also declined to provide any information about how many employees the company has today in its small downtown office.
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 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 reflects how wear and tear reduces the worth of property and equipment. Because AT&T's assets will be worth $11.4 billion less, the quarterly value lost to wear and tear falls.
Many analysts have speculated that AT&T will make itself a more attractive takeover candidate by cleaning up its books and reducing depreciation expense.
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