December 4th, 2008
AT&T cuts 12,000 jobs, will cut capital spending
AT&T said Thursday that it will cut about 12,000 jobs, or 4 percent of its workforce, due largely to “economic pressures.”
The layoffs are beginning to sound like a broken record (or MP3). AT&T said it wants to streamline its operations as its business morphs to one that’s largely dependent on wireless service (statement). AT&T added that it will add jobs in growth areas such as wireless, video and broadband. For many quarters, AT&T’s wireless and U-verse broadband service have shown growth as its once-core wireline business erodes.
AT&T also said that it will cut its 2009 capital spending budget from 2008 levels, but didn’t give specific guidance. In any case, AT&T’s cutbacks are likely to ding telecommunication equipment vendors. According to Morgan Stanley analyst Simon Flannery, AT&T is likely to spend $20 billion, or 16.1 percent of revenue, on capital expenses (click to enlarge chart).
In 2008, AT&T spent heavily to build out its 3G network to prepare for the iPhone and also faced expenses to restore service following hurricane season. Meanwhile, the cost cutting wasn’t a surprise to many analysts. Flannery wrote in October:
We expect AT&T to announce material cost cutting in coming weeks as an offshoot of the recent management reorganization. We believe there is still significant scope to trim opex and capex to deal with a tough macro-economic environment. About 40% of capex is related to growth initiatives.
The telecom giant said it will take a charge of $600 million in the fourth quarter for severance.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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