NEW YORK (Reuters) - Top U.S. phone company AT&T Inc said it will eliminate 12,000 jobs, or about 4 percent of its workforce, in a fresh wave of cuts to cope with an economic downturn that has exacerbated a decline in traditional phone sales.
Joining a raft of companies slashing costs to survive a slump in spending, AT&T said on Thursday it will cut the jobs over the remainder of 2008 and 2009, and take a charge of about $600 million in this year’s fourth quarter for severance.
The carrier also plans to cut its 2009 capital spending from this year’s levels, though spending plans have not been finalized. AT&T said it would provide details in late January.
The cuts come as phone companies struggle with declining land line sales, as more consumers switch to wireless or alternative, cheaper services offered by cable and Internet companies. AT&T cited “economic pressures, a changing business mix and a more streamlined organizational structure.”
The move follows AT&T’s April announcement of 4,600 job cuts, mostly in management, as well as a three-year plan disclosed at the end of last year to cut 10,000 jobs.
Shares of AT&T fell 2.5 percent to $28.36 on the New York Stock Exchange on Thursday afternoon.
Credit Suisse analyst Chris Larsen forecast the company would spend $17 billion in 2009, down 12 percent from 2008 levels.
“The job cuts should not be surprising given the weakening trends in the residential wireline business,” he said.
UBS analyst John Hodulik saw the move in a positive light, saying it would help AT&T preserve its cash position.
“While the weak macro environment is taking its toll on the business, we believe the cuts show the large telcos ... have levers they can pull to partially offset the effects of the slowdown,” he said.
AT&T is just one of several technology and media companies looking to slash costs to survive. Viacom Inc said on Thursday it would eliminate 7 percent of its workforce, or 850 jobs, while Adobe Systems announced a day earlier that it would eliminate 8 percent of its staff, or 600 jobs.
Data released on Thursday showed that U.S. factory orders plunged 5.1 percent in October, underscoring weakening demand as the economy grinds through recession.
Adding to poor sentiment in the technology industry, chipmaker Advanced Micro Devices warned that fourth-quarter revenue would be weaker than expected.
Overseas technology companies are also grappling with weaker demand. Dutch chip equipment maker ASML said it would take advantage of a government scheme to cut working hours, while Japanese media reported that Canon Inc is planning to lay off more than 1,000 contract workers.
One of AT&T’s problems is a decline in sales of traditional phones. Its third-quarter results showed wireline voice revenue fell more than 8 percent from a year earlier.
Shares of AT&T have dropped by about 30 percent so far this year, amid questions on whether the company would be able to make up for the rapid decline in traditional wireline customers.
AT&T has been trying to maintain land line users by investing in new, high-speed Internet and video services, and analysts have said this has yet to yield significant returns despite the high costs.
While its partnership with Apple Inc’s iPhone has helped it win wireless customers, AT&T’s subsidies to buyers in exchange for subscriptions has hurt profit margins.
Verizon Communications Inc is seen having similar problems to AT&T, although it said on Thursday that it had nothing new to announce.
Shares of network equipment makers, or suppliers to phone companies like AT&T, were down on Thursday afternoon. Cisco Systems Inc fell 3.0 percent to $15.53, Juniper Networks Inc fell 4.9 percent to $15.86, while ADC Telecom fell 12.5 percent to $6.00.
Additional reporting by Paul Thomasch; Editing by Derek Caney and Matthew Lewis