Verizon Wields Ax Again

Verizon (VZ) is getting a head start on its New Year's dieting resolution.

As many as 22,000 workers are expected to take buyout offers and leave the big telco's payroll by the end of the year, say people familiar with the situation. Seeking to trim its ranks, the New York phone giant has dangled some cash incentives in front of qualified managers and union workers. The departures would trim the company's workforce by some 10%.

A Verizon rep said it was too early to say what the total number of takers would be, but added that the package was "getting good interest." The exodus could be good news for Verizon investors, who have seen their shares slide throughout 2003 amid the continuing erosion of the company's big local phone business. On Monday, Verizon rose 30 cents, to $32.47.

"We're getting down to fighting weight," said Verizon spokesman Eric Rabe. "We felt it was best to get it done now and start realizing the cost savings."

Verizon's move points out how the big old-line telcos have mostly missed out on 2003's economic recovery rally. Despite a broad upswing in the stock market, the telecom sector has been stuck in the mud as its leaders scramble to cut employment back to preboom levels. Core business revenue, especially among the local phone giants Verizon, SBC (SBC) and BellSouth (BLS), continues to weaken.

Meanwhile the industry has shed about 380,000 jobs during the downturn -- a gargantuan figure until you consider that it added some 500,000 between 1996 and 2000. And without a tremendous pickup in business, more job cuts will be necessary, say analysts.

Vexed Verizon's 2003 slump

That kind of thinking is apparent elsewhere in the telecom industry. As Verizon prepares to send off a sizable number of its workers, Atlanta-based BellSouth said Monday at its analyst day presentation that it will cut $500 million in costs next year and another $600 million in 2005. Though BellSouth executives did not share specifics, they did say they would look at a range of areas, including contractors and staff, to make the necessary cuts.