16. AT&T To Cut Workforce 120 Percent
AT&T stock soared more than 12 points on the news.
The reduction decision, announced Wednesday, came after a year-long internal review of cost-cutting procedures, said AT&T Chairman C. Michael Armstrong. The initial report concluded the company would save $1.2 billion by eliminating 20 percent of its 108,000 employees.
From there, said Armstrong, "it didn't take a genius to figure out that if we cut 40 percent of our workforce, we'd save $2.4 billion, and if we cut 100 percent of our workforce, we'd save $6 billion. But then we thought, why stop there? Let's cut another 20 percent and save $7 billion.
"We believe in increasing shareholder value, and we believe that by decreasing expenditures, we enhance our competitive cost position and our bottom line," he added.
AT&T plans to achieve the 100 percent internal reduction through layoffs, attrition and early retirement packages. To achieve the 20 percent in external reductions, the company plans to involuntarily downsize 22,000 non-AT&T employees who presently work for other companies.
"We pretty much picked them out of a hat," said Armstrong.
Analysts credited Armstrong's short-term vision, noting that the announcement had the desired effect of immediately increasing AT&T share value. However, the long-term ramifications could be detrimental, said Bear Stearns analyst Beldon McInty.
"It's a little early to tell, but by eliminating all its employees, AT&T may jeopardize its market position and could, at least theoretically, cease to exist," said McInty.
Armstrong, however, urged patience: "To my knowledge, this hasn't been done before, so let's just wait and see what happens."