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AT&T, DuPont cutting thousands of jobs

AT&T Inc. joined the recession's parade of layoffs Thursday by announcing plans to cut 12,000 jobs, about 4 percent of its work force. Separately, DuPont said it will cut 2,500 jobs.
/ Source: news services

Pressured by the economic turmoil and the mounting loss of traditional phone customers, AT&T Inc. is cutting 12,000 jobs, about 4 percent of its work force.

Separately, DuPont said it will cut 2,500 jobs, mostly serving the U.S. and European automotive and construction markets, due to lower demand linked to the steep global decline in homebuilding, auto sales and consumer spending.

Dallas-based AT&T, the nation's largest telecommunications company, said the job cuts will take place this month and throughout 2009. The company also plans to lower its capital spending next year, and one analyst estimates that reduction could be as much as $2 billion.

The 300,000-person company has announced layoffs several times over the past few years, including in April, when it said it would eliminate 4,600 jobs, but it has been hiring at the same time. This is the first time since the company bought BellSouth Corp. in 2006 that it said overall staffing would decline.

The new cuts were part of a parade of layoffs tied to the recession. In addition Thursday, chemicals company DuPont announced plans to lose 2,500 jobs, Credit Suisse Group slashed 5,300 and media conglomerate Viacom Inc. jettisoned 850. Yet AT&T, which provides local phone coverage in California, Texas and 20 other states, is also being pulled by another current: the long-term trend of people defecting from landline phones to wireless services or phone service from the cable company.

In the last quarter, AT&T's basic voice lines in service dropped 11 percent. Its wireless customer base, meanwhile, grew 14 percent.

Reflecting that "changing business mix," the company said it still plans some hiring in 2009 in parts of the business that offer cell phone service and broadband Internet access.

The shift away from landlines has accelerated because of the economic turmoil, said Christopher King, an analyst with Stifel Nicolaus. Fewer homes bought means fewer landlines getting installed or transferred. And more are getting disconnected as people look to save money and rely only on their cell phones.

AT&T spokesman Walt Sharp said the layoffs will be "across the company and across the country," but would not specify what departments and cities would be most affected.

King expects most of the lost jobs to come from the company's landline business. But he said some might also come from the unit of the company that serves large businesses and accounts for about 30 percent of AT&T's sales. Companies have been cutting back spending because of the recession, and this, King said, will "certainly pinch" AT&T's revenue growth.

AT&T, whose shares are down about 30 percent this year — while the Dow Jones industrial average is off 35 percent — remains profitable, and benefits from being the sole U.S. wireless carrier for Apple Inc.'s popular iPhone. This is in sharp contrast to rival Sprint Nextel Corp., which has been hemorrhaging wireless subscribers and has seen its shares lose 80 percent of their value this year. Last month, Sprint said it is offering voluntary buyout packages to an unspecified number of its 57,000 workers.

Verizon Communications Inc., the nation's second-largest phone company, has fared better than AT&T so far. Its landline business is concentrated in the Northeast, which hasn't been as battered by the housing crisis as some of the markets AT&T serves, like Florida and California. However, Verizon figures to be more affected by a slowdown in business spending and the fallout from the financial sector's crisis.

AT&T plans to take a charge of about $600 million in the fourth quarter to pay for severance costs. The company is still finishing its capital spending plans for next year, and said it will give more specifics on the planned reductions when it posts fourth-quarter earnings in January.

UBS analyst John Hodulik estimates the layoffs will save the company about $720 million, or 8 cents per share, annually. He also expects AT&T's reduction in capital spending to amount to about 10 percent of the $20 billion being spent in 2008.

AT&T noted that many of its non-management employees have guaranteed jobs because of union contracts. All affected workers will receive severance "in accordance with management policies or union agreements," the company said.

Chemicals maker DuPont, based in Wilmington, Del., also said it will trim 4,000 contractors by the end of this year, with additional contractor reductions expected in 2009.

DuPont Co. is forecasting a 2008 fourth-quarter loss of 20 cents to 30 cents per share, excluding restructuring charges of about 40 cents per share. The company expects 2009 earnings to range between $2.25 and $2.75 per share, anticipating the current global recession will continue well into 2009.

Analysts surveyed by Thomson Reuters currently predict quarterly profit of 23 cents per share and fiscal 2009 earnings of $2.80, on average.

In addition, AbitibiBowater Inc., the world's largest newsprint maker, said Thursday it will close or idle at least four paper mills and cut some 1,100 jobs to bring its production capacity into balance with falling demand.

The Montreal, Canada-based company, whose stock has fallen about 97 percent this year, faces a deteriorating customer base as newspapers struggle and their demand for paper plummets. In October, demand fell 18.2 percent.

The news from these companies came as government data showed more evidence of consumers' weary state and the nation's deteriorating job market. People continuing to draw unemployment benefits climbed to a 26-year high, while retail sales and orders to U.S. factories sank.

The number of newly laid-off people signing up for unemployment benefits last week dropped by 21,000 to 509,000, the Labor Department reported. Even with the drop — which was better than the increase economists were forecasting — the level of jobless applications was still quite high and pointed to a deeply troubled employment climate.