Ben Klayman
CHICAGO: Job cuts at No. 2 US long distance telephone company WorldCom Inc.,
the world's second largest cell-phone maker Motorola Inc. and other telecom
companies are just the beginning of another round of slashing in an already
battered industry, analysts said on Thursday.
"The bottom line is we haven't seen the bottom. It's the worst time in
telecoms history," independent telecom analyst Jeff Kagan said.
"Fortunately, telecom is like oxygen. We need it so it's going to survive
and it's going to recover, but this is just unprecedented."
"The telecom world order will look much different in five years,"
he added, explaining more consolidation is inevitable.
The telecommunications industry cut almost 318,000 jobs last year and has
announced the elimination of an additional 135,000 positions through May this
year, both leading totals for all industries in those periods, according to
outplacement firm Challenger, Gray & Christmas.
‘Struggling with the bubble’
Any hoped-for rebound has been delayed repeatedly as spending at such
carriers as Sprint Corp. and Qwest Communications International Inc. has further
slumped, forcing more job cuts.
"I don't think that it's finished," Jane Zweig, CEO of wireless
consulting firm, the Shosteck Group, of the job cuts. "It's an industry
struggling with the bubble." WorldCom and Motorola's job cuts were just the
latest blows, following closely on the heels of new cuts or warnings from such
smaller players as Tellium Inc., Sycamore Networks Inc. and Ciena Corp.
Verizon Communications, the No. 1 US local phone carrier, also said earlier
this year it would cut the equivalent of 10,000 jobs through layoffs, reduction
in overtime and eliminating contract workers. It has not provided an update on
how many of those have been eliminated.
WorldCom faces fraud charges over improper booking of nearly $4 billion in
costs and false reports of profits over the past five quarters.
The Clinton, Mississippi-based company late Tuesday fired its chief financial
officer and said it would cut 17,000 jobs, or more than 20 percent of its work
force, and slash its capital spending budget by 40 percent to $2.1 billion.
Motorola said Thursday it would cut another 7,000 jobs, or 7 percent below
its previous year-end target of 100,000 employees, and take charges totaling
about $3.5 billion to essentially complete its restructuring. Chairman and chief
executive Christopher Galvin said the Chicago area-based company was taking
itself back to its 1995 size, before the excesses of the telecom and dot-com
booms.
"The investment era of the late 1990s won't repeat itself perhaps in our
working lifetimes because so many of the highly touted business models probably
didn't exist to begin with," he told analysts on a conference call.
Tellium, which makes optical switches for telephone carriers, said this week
it would slash 200 jobs, or more than one-third of its workers, while last week
Sycamore, another telecom equipment maker, said it would slash 235 jobs, or
one-third of its work force.
Minneapolis-based ADC Telecommunications Inc. said in May it expects to
return to profitability by cutting more jobs and reducing factory costs further.
Ciena's warned last week its fiscal third-quarter revenues could be "down
meaningfully," leading some analysts to predict more job cuts at the
telecom equipment firm.
However, Ciena is not expected to be alone. Numerous analysts expect telecom
equipment giant Lucent Technologies Inc., which has said it plans to reduce its
work force below 50,000, will actually need to cut closer to Canadian rival
Nortel Networks Corp., which has targeted 42,000.
A Lucent spokesman said the company remains on track to reach the 50,000
figure by the end of September, but it will respond to market conditions as
necessary.
Other telecom companies expected to ax more workers in response to the weak
environment include Citizens Communications Co., and telecom equipment makers
Alcatel of France, Sweden's Ericsson, Tellabs Inc. and Juniper Networks Inc.
Alcatel warned on Wednesday it was headed for an operating loss this year,
and analysts said it could axe another 10,000 jobs, or 12 per cent of its work
force.
(Additional reporting by Yukari Iwatani in Chicago)
(C) Reuters Limited.