AT&T shares sink after news of job cuts

SEATTLE - Shares of AT&T Inc. sank as low as $26.97 Friday, a day after the telecommunications company announced plans to cut 12,000 jobs, about 4 percent of its work force, by the end of next year.

It had pared back its losses by midafternoon, to $27.60, down 60 cents.

While paying fewer workers is ultimately expected to help AT&T save money, UBS analyst John Hodulik wrote in a research note that those savings aren't coming in 2009.

Hodulik wrote that he expects higher pension costs to weigh more heavily than expected on the Dallas-based company, due to certain accounting methods. The analyst slashed expectations for AT&T's 2009 earnings to $2.67 per share from $2.80 per share.

Hodulik maintained a "Neutral" rating on the stock.

AT&T said Thursday the layoffs will be across the company and the country, but did not say what areas would be most affected. In the last quarter, the company's voice phone lines in service dropped 11 percent, while wireless customers rose 14 percent.

AT&T said it plans to record a charge of about $600 million in the fourth quarter to pay for severance costs.

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