CHICAGO – Sprint Corp. (FON) said Wednesday it would cut about 2,100 jobs, the second round of layoffs at the No. 3 U.S. long-distance telephone company in the last month, to cope with the severe industry downturn.
The latest cuts, which affect about 3 percent of Sprint's work force, come as it faces weak demand for long-distance, wireless and data services, a problem plaguing all phone companies.
"The job cuts are certainly consistent with what we've been seeing industry-wide," said Jefferies & Co. analyst Richard Klugman, who has a "hold" rating on Sprint.
Klugmach has scheduled an analysts' meeting in New York on Thursday, said about 1,000 of the jobs would go over the next 12 months as the company combines the computing, network and billing departments of its Global Markets, Local Telephone and Sprint PCS (PCS) wireless divisions.
On top of that, Sprint said it would cut 1,100 jobs — 300 jobs from within Global Markets, 450 from Local Telephone and about 300 from its corporate staff unit.
Telecom Still in Downturn
"The telecom industry is still in a downturn in the fourth quarter and it will probably be flattish in the first half" of next year, Guzman & Co. analyst Patrick Comack said. "As the top-line growth slows, they have to find the earnings growth from (profit) margin expansion and that means a lower head count."
Comack expects PCS to perform in line with its peers, while he has an "outperform" rating on the long-distance business. He does not own either stock, and Guzman & Co. has a banking relationship with Sprint.
On Nov. 14, Sprint said its PCS wireless unit, the nation's No. 4 wireless phone company, would cut 1,600 jobs, or 6 percent of its work force, to trim costs due to slow customer growth.
Sprint said it expected to take a pretax charge of about $85 million in the fourth quarter related to the latest job cuts. It said the actions, when completed, were expected to result in yearly cash savings of about $145 million.
"The consolidations ... are a necessary step if we are to capitalize on our strength," Sprint Chairman and Chief Executive William Esrey said in a statement, referring to the company's ability to offer landline and wireless voice, data and Internet services under one brand.
In the latest round of cuts, about $55 million of the severance-related costs and $95 million of the cash savings will be included in Sprint's results, with the rest included in the PCS unit's results, the company said.
Shares of Sprint fell more than 4 percent initially on the news, and closed off 56 cents, or 3.95 percent, at $13.60 on the New York Stock Exchange. PCS fell as much as 6.7 percent, but pared losses to close 25 cents, or about 5 percent, lower at $4.80.