Sprint Nextel plans to reduce its headcount by 8,000 employees by the end of the first quarter, precisely one-seventh of its total workforce.
The company said it expects the move to eventually save approximately $1.2 billion on an annualized basis.
More than 7,000 positions will be eliminated through layoffs. A little over 10 percent of the total, about 850 employees, are expected to accept a voluntary severance package Sprint began offering at the end of 2008.
The layoffs will impact all levels of the company, Sprint said, and the impact on geographic locations will vary. Operations involved in any form of customer service, however, are likely to be more lightly affected, Sprint said.
The company cited a “challenging economic environment.” It said it repaid $2 billion in debt in the second half of 2008 and renegotiated its credit facility terms with the expectation of sufficient liquidity to pay debt coming due during the next two years.
At the end of the third quarter of 2008, the company had a cash balance of $4.1 billion and said that it had expected to continue to generate free cash flow in the fourth quarter.
Sprint cut 4,000 jobs in January 2008 and 5,000 in January 2007. Its fourth-quarter financial report is being moved up to Feb. 19.
Sanford Bernstein analyst Craig Moffett noted that layoffs are not enough to fix Sprint considering tough competition and a tougher economy.
“It’s a painful but necessary step. But at the end of the day, layoffs are never more than a Band-Aid. They can help stop the bleeding, but they don’t do much to cure the patient,” Moffett said. “Unless they actually address the core problem, which is growth, they haven’t really gotten to the heart of it.”
Bankruptcy is not imminent, but whether Hesse and CFO Bob Brust can execute a successful turn-around remains to be seen, Moffett said. Meanwhile, “our advice has been to steer clear of Sprint shares and that continues to be, we think, the most prudent course.”
Verizon will report its earnings Tuesday, and AT&T will report Wednesday. Moffett said he does not expect layoffs from the big telcos.
– Wireless Week’s Evan Koblentz contributed to this report
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