AT&T Corp. could pare more than a fifth of its top executive echelon and eliminate thousands of other jobs by the end of this year as part of a continuing effort to cut $2 billion from its expenses, company officials said yesterday.
Executives plan to announce additional details of the company's staff-reduction plans at today's quarterly-earnings-report conference call with Wall Street analysts.
Many of the cutbacks will likely affect AT&T's consumer-services unit, which brings in several billion dollars in revenue but is suffering from rate wars among long-distance carriers.
Company spokesman Burke Stinson said AT&T already has begun trimming its network, sales and administration spending. He said that "more than 20 percent of the top executive jobs"--some 500 to 600 positions throughout the company--could be phased out. The Wall Street Journal, citing sources, reported that as much as 25 percent of AT&T's highest-ranking staff would be cut.
These top officials earn up to $700,000 plus bonuses of up to $950,000 plus stock options, according to AT&T's latest proxy statement. On average, the executives make more than $200,000 a year, plus bonuses and stock, Stinson said.
Last year, the company cut about 1,500 positions in network services and 250 in consumer services while aggressively expanding cable-television and wireless-telecommunications efforts. AT&T has spent more than $110 billion in the past three years to transform itself into the nation's largest cable company--offering high-speed or "broadband" Internet access as well as television programming--by buying Tele-Communications Inc. and MediaOne Group Inc. The latter acquisition is still pending.
America Online Inc.'s recent acquisition of Time Warner Inc., with its vast network of local cable franchises, puts it into more direct competition with AT&T. For the better part of last year, the two companies were locked in a battle over whether cable operators should be forced to give their customers unfettered access to competitive Internet service providers.
In late 1999, AT&T stock was trading in the low 40s as investors worried that growth in its core long-distance business was sluggish. But at year's end, its stock bolted as much as 30 percent amid renewed enthusiasm for its cable and wireless projects. Shares of AT&T dipped $1.56 1/4 to close at $50.50 yesterday.
Robert Wilkes, a telecommunications analyst at Brown Brothers Harriman & Co., said the cost cuts will help boost AT&T's cable efforts, which have not moved as quickly as the company had hoped. Wilkes said he believes the first real test of whether AT&T's cable investments will pay off will come this year.
"It will be important for them . . . to make progress in delivering a range of services using the cable-broadband platform, including voice and high-speed interactive services," Wilkes said.
The operating-cost cutbacks at AT&T began when C. Michael Armstrong, formerly head of Hughes Electronics Corp., took over as chairman and chief executive in 1997 and expressed dismay at the company's administrative overhead.
In January 1998, he announced a management buyout that attracted 15,000 managers. At the time, Armstrong also said he would freeze executive salaries and conduct a performance review of top presidents and vice presidents. As a result, about a dozen high-ranking executives left in 1999, said spokesman Stinson.
Staff researcher Richard Drezen contributed to this report.