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Telecommunications giant AT&T will cut 12,000 jobs to reduce expenses amid slowing business conditions, due to the U.S. recession, the company announced Thursday.The cuts amount to a 4% workforce reduction, and the company also said it will take a company-record $600 million charge in Q4 for severance expenses.
Shares of AT&T (NYSE: T) Wednesday closed up $1.04 to $29.08.
AT&T added that it also plans to cut spending in 2009, and will announce details of those cuts in January 2009, when it releases Q4 earnings results.
However, AT&T said it will continue to add jobs in its wireless, video, and broadband units.
Economist Richard Felson said the U.S. recession will hurt household formation, resulting in a likely decrease in AT&T's landline phone subscribers. Cell phone revenue will be affected as well, he said, but the revenue losses in this category will likely be limited to subscribers choosing cheaper mobile phone service packages and mobile phones.
"All things considered, AT&T has fared comparatively well during the first part of the U.S. recession, and it has the capital and management experience to weather the storm," Felson said. "Its stock price has dropped from about $40 to around $30 this year, but in today's stock climate, that's not outrageous." Felson added that he does not have a rating on nor own shares in AT&T.
Stock Analysis: What's old, becomes new. AT&T was once out-of-favor with many investors, given its conservative business model, as investors preferred the daring growth plays during the 'Bush pseudo-economic boom.' Times have changed, and the mantra now is: invest in companies that are likely to have business models capable of weathering the recession and the financial crisis. By those standards, AT&T looks attractive.
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