AT&T (T) is planning additional cost cuts and a retreat from more markets as the shrinking phone giant tries to fortify its hold on big business customers.
Shares of the New Jersey phone shop dipped 2% Thursday after the company
posted mixed fourth-quarter earnings.
On a conference call with analysts Thursday, AT&T brass promised that margins would hold steady despite a projected 16% sales drop in 2005. Executives blamed the accelerated revenue erosion on price pressure from the Bells --
-- in the small and midsize business markets, as well as continued price wars in the wholesale market.
In response, AT&T is preparing to scale back marketing to smaller businesses. Similarly, last year, in the wake of regulatory setbacks, AT&T pulled the plug on its consumer sales efforts.
Having cut 23% of its staff in 2004, AT&T says an additional 5,100 people will leave the payroll as part of the previous layoff announcements. But the cuts won't stop there. CEO Dave Dorman said on the conference call Thursday that there will be "further reductions beyond that, but at a lesser pace than 2004."
Holding to policy, AT&T didn't give a current headcount number. The company had about 60,000 employees at the end of 2003, and with 13,800 sent packing in 2004, there should be around 46,200 now. And though Ma Bell executives didn't offer specifics, they hinted that new staff cuts likely will come as the company scales back businesses and automates more of its operations.
Hoping to draw attention away from the clouds hovering over the business, AT&T executives stressed their strongest focus is on the top tier of customers. The executives emphasized that 90% of the company's revenue comes from its big business and government customers. And though he cited few examples, Dorman said there were signs of potential price stabilization in what's typically a cutthroat business services market.
Asked for examples of this newfound price stability, the executives said they were "not seeing new lows in the market" in terms of aggressive price cuts.
The company also remained squishy on its dividend and stock buyback plans. AT&T generates more than $1 billion in quarterly free cash flow, and some investors expected the company to start sharing its wealth with stockholders as early as last year. On the conference call, executives said they are reviewing their options and don't expect to put any plans in place until midyear.
"I think this is a disappointment for some investors, but I don't think the longs will start selling now," says one New York hedge fund manager who was short AT&T. "They'll probably hang on for the dividend."