WASHINGTON – AT&T Corp. (T) is cutting 7,400 more jobs and slashing the book value of its assets by $11.4 billion, drastic moves prompted by the company's plan to retreat from the traditional consumer telephone business following a lost court battle.
The company announced Thursday that it now plans to shrink its work force by a fifth, or about 12,320 jobs, during 2004 — up from a previous target of about 4,900 jobs.
About 9,000 of the positions have already been eliminated, according to a source familiar with the situation who spoke on condition of anonymity.
Severance costs and other expenses related to the job cuts will reduce third-quarter earnings by $1.1 billion, the company said.
The asset writedown of $11.4 billion, reflecting the reduced value of AT&T's network now that it will be carrying less consumer voice traffic, will be charged against earnings in the third and fourth quarter.
AT&T (search), still the nation's biggest long-distance carrier, announced in July that it would no longer spend money to sell long distance or local service to consumers.
That withdrawal followed a federal court decision that will make it more expensive for AT&T to sell local service by leasing residential lines from the Bell monopolies, who at the same time are luring away AT&T's long-distance customers.
The announcement of more job cuts and an asset writedown had been expected for weeks.
In an August filing with the Securities and Exchange Commission (search), AT&T warned that the value of its national phone network would need to be recalculated since it could no longer be relied upon to generate as much revenue.
AT&T invested billions of dollars upgrading that network, the company's biggest single asset, during the technology boom.
At the end of June, AT&T's assets totaled $43.8 billion, including $22.8 billion in property and equipment and $4.8 billion worth of goodwill, which reflects the premium AT&T paid above market value for acquisitions.