Ma Bell also sets $11.4B writeoff as it retreats from selling long-distance service to consumers.
October 7, 2004: 6:27 PM EDT
WASHINGTON (Reuters) - AT&T Corp. will cut another 7,400 jobs and reduce the value of its assets by $11.4 billion, spurred by its retreat from traditional consumer telephone services, the company said Thursday.
The company said the new job cuts, which raises its total cuts to 20 percent of its work force this year, and other cost measures would boost operating profits in the second half of the year.
The moves are part of efforts by the third-largest U.S. telephone company to shift its focus to business services and cut costs amid a price war for long-distance service and increasing competition from the dominant U.S. local telephone companies.
"We expect to see some real effect of the head count and other reductions on the profit of the business in the second half of this year,'' AT&T Chief Financial Officer Thomas Horton told Reuters. "This has been hard work, but it is bearing fruit on the cost structure of the company.''
The announcement, much anticipated by analysts, sent AT&T (T: Research, Estimates) shares up slightly in after-hours trading. The stock, one of the most widely held in the United States, fell about 1 percent in regular trading. The announcement came after the closing bell.
AT&T said while the job cuts will trigger a $1.1 billion charge to third-quarter earnings, the asset writedown will reduce depreciation costs by $1 billion for the remainder of the year.
The writedown in the value of assets will be taken as a charge against earnings, the company said.
AT&T had said it would be forced to cut jobs and review the value of its $43.8 billion asset base after it decided in July to retreat from the traditional consumer telephone business due to unfavorable rulings from federal regulators and courts.
The company, which had cut about 8 percent of its 61,600 workers by the end of the second quarter, said the new cuts would bring the total reduction to 20 percent of its work force.
About three-fourth of the total cuts have already been made, and Horton said the cuts had fallen "disproportionately'' on AT&T's consumer division.
Other telecom firms, such as MCI Inc.,had been forced to write down the values of their assets by billions of dollars after the burst of the dot.com bubble and an ongoing glut of telecommunications capacity.
AT&T said it was on track for its targets for cash flow and a reduction in net debt to under $7 billion, and would consider different uses for its cash. Horton said those uses could include share buybacks or an increase in the dividend, but no decision had been made.
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