AT&T; Firings May Mark Wide Downsizing

WASHINGTON — AT&T; Corp. is expected to announce Monday the layoff of more than three dozen public relations officials--the first installment of what may develop into a major downsizing under new Chairman and Chief Executive C. Michael Armstrong.

Although AT&T; officials say the layoffs were planned before Armstrong’s arrival, they come amid the departure of another high-level executive and heightened speculation that larger layoffs are in the works.

Ron J. Ponder, AT&T;’s first chief information officer, announced he plans to leave the company effective Dec. 1 as a result of a massive reorganization of his computer systems support unit. About 30,000 of Ponder’s staff were transferred or laid off, leaving him with reduced control of 40,000.

Moreover, Armstrong has confided to associates recently that he foresees the need for a major downsizing in AT&T;’s work force and an accompanying large write-off of assets, according to industry

sources.

Last year, AT&T; took a $6-billion pretax charge and announced it would cut 40,000 employees. The new round of cutbacks is said to be targeted at its marketing and sales units, whose functions are increasingly being assumed by AT&T;’s customer support staff.

Despite the layoffs announced in January 1996, the company now has about 5,000 more workers than the 128,000 it employed when the cuts were unveiled--adjusted for the spinoff of Lucent Technologies Inc. and NCR.

As a result, many analysts believe Armstrong will be under pressure to slash AT&T;’s payroll.

“AT&T; has been through this layoff business a couple of times, [but] they always seem to be retraining people and bringing them back,” said Raghu Ram, a telephone analyst at Wheat First Butcher Singer Securities in Richmond, Va. “I think they are going to have to cut some more.”

The firm reported two weeks ago a 15% decline in net income, to $1.153 billion, in the third quarter, citing higher-than-expected costs related to communications services.

Armstrong acknowledged in meetings with analysts after his hiring last month that AT&T;’s cost structure was “too high,” but he faces the delicate task of trying to wring any cost savings from further job cuts.

Armstrong’s predecessor as chairman, Robert E. Allen, was sharply criticized for launching a management buyout plan in November 1995 and then telegraphing the prospects of massive involuntary cuts just as the 1995 Christmas holiday season was unfolding.

AT&T; officials said they may not have any choice but to act soon. Like many other telecommunications carriers, the company is feeling the heat of intensified industry competition.

Already, AT&T; is trying to refocus itself on its core business, announcing recently that it would sell its credit card unit, the AT&T; Universal Card Services unit and its AT&T; Solutions Customer Care unit. In the last year, the firm has sold businesses worth $2 billion.

Moreover, a high-speed industry consolidation is creating tougher competition for AT&T; down the road, while the industry giant had been stumbling in its efforts over the last year to find a new CEO.

But in some areas, the company also appears short-staffed, particularly in its forays into the Internet and local-phone business.

Leslie Carter, a vice president of sales at Intermedia Communications Inc. in Tampa, said her sales staff hasn’t encountered any AT&T; salespeople peddling local-phone service or high-speed data lines.

“We see a few from MCI, but we can go all day and hardly run into anybody from AT&T;,” Carter said.

To close the gap, AT&T; is embracing a fast-growing category of computer software products to help it boost sales, productivity and improve customer service without hiring a lot more staff.

The products, known as sales and customer service automation programs, have become a hot area of software development.

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Times staff writer Karen Kaplan contributed to this report.