At&T; Cuts Delight Investors Stock Soars After Company Announces Plan To Eliminate 40,000 Jobs

Investors cheered AT&T Corp.’s announcement Tuesday that it will cut 40,000 jobs, pushing shares in the phone company up $2.50 to $67.25.

AT&T is among the most widely owned stocks in the nation, and was the sixth-most active share in U.S. markets Tuesday on trading of 5.21 million shares.

The telephone giant will take a $4 billion fourth-quarter charge to cut the jobs, 13 percent of its work force, as part of its sweeping plan to split into three companies.

AT&T is slashing costs to prepare for increased competition in the long-distance phone market, while it simultaneously spends billions of dollars to enter new businesses such as local and wireless phone services. Those markets will see more competition as the U.S. overhauls its telecommunications laws.

Investors viewed Tuesday’s moves as a workable plan to remain competitive.

“They are eliminating people to get out of the starting gate as lean and mean as possible once deregulation occurs,” said Ken McGee, analyst at Gartner Group, a Stamford, Conn.-based consulting firm.

“It shows they are very serious about cutting costs,” said Hersh Cohen, who manages the Smith Barney Appreciation Fund, which owns 1.4 million AT&T shares. “This is a company that is doing everything right.”

The company’s shares are up 17 percent since Sept. 19, the day before it announced its restructuring, adding about $15.5 billion to AT&T’s market capitalization in less than four months.

“(AT&T) has attracted a lot of buyers into the stock that would not have been there otherwise,” said William Deatherage, an analyst at Bear Stearns & Co.

About 30,000 of the 40,000 job reductions are expected to come through layoffs.

The cuts are the largest ever for the biggest U.S. phone company, which said in September it would need fewer managers. About 70 percent will come by the end of the year, with the rest in 1997 and 1998. The company will begin notifying workers in mid-January.

“The reductions and other actions are absolutely essential if our businesses are to be competitive,” said Chairman Robert Allen. “This puts us right on track to create three new companies that will be positioned as strongly as possible to succeed in their markets.”

On Sept. 20, AT&T said it would divide into a $50 billion phone company that will keep the AT&T name; a $20 billion communicationsequipment maker; and a maker of mainframe computers and automated teller machines.