Sprint may trim up to 10,000 jobs to cut costs

Second-quarter earnings fall 35%, sales drop 3%

October 16, 2001|By BLOOMBERG NEWS

WESTWOOD, Kan. - Sprint Corp. may eliminate as many as 10,000 jobs, or 11 percent of its work force, to help reduce costs after profit fell at the No. 3 U.S. long-distance telephone company, some analysts and investors said yesterday.

The company's second-quarter earnings fell 35 percent on a record sales decline of 3 percent.

Sprint and the two biggest long-distance operators, AT&T Corp. and WorldCom Inc., have been hurt by lower calling prices and the loss of customers to new competitors, analysts said. Verizon Communications Inc. and SBC Communications Inc., the biggest local-phone companies, have won approval to offer long-distance service in states including Texas and New York.

"They're looking for people to cut to offset some of the profit declines they're seeing in long distance," said Patrick Comack, a Guzman & Co. analyst who has a "buy" rating on Sprint. He doesn't own any shares.

Mark Bonavia, a spokesman for Westwood, Kan.-based Sprint, declined to comment.

"Clearly, it's coming," said John Maxwell, a telecommunications analyst at Waddell & Reed Financial Inc. in Overland Park, Kan., where Sprint has some offices. "I go to pick my daughter up from gymnastics, and I hear the Sprint guys talking about cuts." He said his company owns shares of Sprint and its PCS Group mobile-phone unit.

"It's got to be more than 2,000, and I'd be surprised if it was more than 10,000" positions, Maxwell said. The company may save $100,000 for each employee fired, he said.

Sprint has about 88,000 employees, spokeswoman Robin Carlson said.

"The key to Sprint making it through this tough period is ... to cut costs," said Jeffrey Kagan, a telecommunications analyst based in Atlanta. "Typically, what we're seeing today is in the five digits," said Kagan, who doesn't own the stock. "That's what Wall Street loves to see. You don't want to do it in dribs and drabs, because that demoralizes the work force."

Shares of Sprint rose 16 cents to $23.60 yesterday. They have fallen 3.9 percent in the past year.

Job reductions may hurt the company, one investor said.

"I sometimes worry about corporate layoffs," said Bern Fleming, manager of the AXP Utilities Income Fund, which holds 2.8 million Sprint shares.

"You don't want to get rid of good people."

Some of the job reductions may come from shelving part or all of a service that combines fast Internet access with calling, known as ION, for integrated on-demand network. Sprint has had trouble transmitting calls over it. In May, the company said it was scaling back plans to add as many as 85 markets to the 15, including Dallas, in which the service was offered.

Sprint has spent $2 billion on the project, which was announced in June 1998. The company said yesterday that it will give an update on ION in a conference call Thursday morning.

Executives, including President Ronald LeMay, will answer questions from analysts on the quarterly call, something they haven't done recently.

The company also moved up the announcement of its third-quarter results to tomorrow from Thursday, without saying why.

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