Two decades ago, AT&T Corp employed more than 1 million people across the US. Yesterday's announcement that AT&T will cut its workforce by 20 percent to 49,000 by the end of the year reflects the decline of a company whose phone service was once ubiquitous in US homes.
AT&T, retreating from the residential business it began a century ago, is closing offices in West Virginia, Hawaii and Puerto Rico, and said yesterday it will eliminate 7,400 more jobs, for a total of 12,300 this year, and write down US$11.4 billion in assets.
Chief Executive David Dorman is shrinking AT&T, the largest US long-distance service provider, as he tries to keep pace with falling phone rates that drove sales last year to the lowest since 1987. In the eight years since the telephone market was deregulated, local carriers such as Verizon Communications Inc have poached more than 35 million residential long-distance customers.
"They needed to do it as a matter of survival," said Daniela Spassova, a fund manager at Principal Global Investors in Des Moines, Iowa, which owns AT&T bonds. "It shows you how grave the situation is."
AT&T shares have fallen 26 percent this year as profit tumbled. The stock rose as much as US$0.31 to US$15.35 in extended trading after the announcement yesterday. They earlier fell US$0.16 to US$15.04 in New York Stock Exchange composite trading.
Bedminster, New Jersey-based AT&T yesterday said it stepped up the pace of firings. The company had planned to cut the workforce by 8 percent.
The decision to pull back from the consumer market prompted the extra cuts, AT&T said. About three-quarters of those affected have already left or been notified, the company said.
AT&T's decline has been reflected in its market value, which has tumbled from US$51.7 billion in 1999 to US$12 billion yesterday, according to Bloomberg data.
The stock was removed from the Dow Jones Industrial Average in April and replaced by Verizon. AT&T's assets have tumbled from US$150 billion in 1983, before the company was ordered broken up by the government, to US$44 billion in June.
Verizon, with a market capitalization of US$114 billion, is now 10 times larger than AT&T. SBC Communications Inc has a market value of US$90 billion.
AT&T's credit rating has also mirrored the company's fortunes.
Having once commanded the highest AAA rating, AT&T was cut to junk, or below investment grade, by Moody's Investors Service in July, which cited "relentless" competition that will cause a longer, larger decline in revenue and profit than previously thought.
AT&T's first-half profit plunged 63 percent and sales dropped 12 percent. Operating income will fall to US$1 billion to US$1.4 billion this year from US$3.66 billion last year, AT&T said in June.
Sales will fall to about US$30 billion from US$34.5 billion.
About 60 percent of the employees losing their jobs are managers, AT&T said in a filing with the Securities and Exchange Commission.
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