Sprint announces 6,000 layoffs, will drop ION unit

Thursday, Oct. 18, 2001 | 9:58 a.m.

SUN STAFF AND WIRE REPORTS

KANSAS CITY, Mo. -- Sprint Corp., citing the weak economy and "a rapidly changing industry landscape," announced Wednesday it will lay off about 6,000 employees, or 7 percent of its work force, and eliminate 1,500 contract workers' jobs.

The company also said it would discontinue its money losing voice and high-speed Internet unit, ION. It had yet to be deployed in the Las Vegas market, nor was a release date ever announced.

The announcements came as Sprint, the nation's third-largest long distance provider, reported lower third-quarter earnings and a loss for its PCS wireless division.

Sprint also said it will restructure elements of the company's various divisions, including Global Markets Group and the company's fixed wireless services -- which refers to the operation of wireless devices or systems in fixed locations such as homes and offices -- in an effort to save an estimated $1 billion annually starting in 2002.

Sprint is the dominant local phone provider in Las Vegas and employs 2,000 people in Southern Nevada through its local, long-distance, and PCS (wireless) divisions.

Detra Page, the company's Las Vegas spokeswoman, said Wednesday's announced layoffs are not expected to spread to the Southern Nevada division. That's because most of the layoffs were in the ION department.

Most of those employees worked in Kansas City, Page said.

Sprint had held out on layoffs even as its telecommunications competitors shed about 225,000 workers.

"Several factors influenced our decision to discontinue the Sprint ION initiative, including the rapidly changing industry landscape and future funding requirements for the ION, especially in light of the economic slowdown and the uncertainty of the timing of the recovery," William T. Esrey, Sprint's chairman and chief executive officer, said in a statement.

ION, a value-added digital subscriber line service, let customers connect to the Internet and simultaneously use one or more separate phones, all through a single phone line. ION was ballyhooed when it was announced in 1998, but "it just kind of fizzled," said Tom Morabito, a telecom analyst with McDonald Investments in Cleveland.

Earlier this year Sprint said it had scaled back the deployment of the integrated voice and data service while it ironed out problems with voice call quality.

Ramkrishna Kasargod, an analyst with Morgan Keegan & Co. in Memphis, Tenn., said Sprint had a choice: it could keep investing in ION, betting that it would be profitable eventually, even though it hurts the bottom line now. Or it could cut ION, sacrificing future earnings for a quick balance-sheet boost.

Esrey said the company believes knowledge gained from the ION experiment will help in the future as technology continues to evolve.

"We believe that our vision that customers will desire integrated communications services still holds true," Esrey said. "However, it is clear that with our current efforts an appropriate return on investment cannot be achieved in an acceptable time frame and we are adjusting our plans accordingly."

Kasargod said bringing the service back later in another form might not be difficult.

Kasargod said Sprint is in better shape than some other telecom companies, "because they do have customers, they do have revenues."

For the quarter ended Sept. 30, Sprint Corp. FON Group reported a 60 percent drop in earnings to $154 million, or 18 cents per share, compared with $384 million, or 43 cents per share, in the year-earlier period. Excluding one-time items, the company earned 28 cents a share, including a loss of 11 cents for ION, compared with 43 cents a year ago, which included a loss of 9 cents per share for ION. The results were in line with estimates.

Revenue fell 4.5 percent to $4.244 billion.

Sprint PCS, the company's wireless division, reported a loss of $288 million, or 29 cents per share, in the quarter, compared to a loss of $390 million, or 41 cents per share, a year ago. This quarter's loss was wider, however, than the 22 cents expected by analysts surveyed by Thomson Financial/First Call. PCS revenue surpassed expectations, growing 55 percent to $2.65 billion.

Shares of Sprint Corp. fell $1.01 to $21.99 on the New York Stock Exchange, where shares of the PCS tracking stock rose 7 cents to $26.45.

Sprint employs 84,000 worldwide -- about 14,500 in the Kansas City area. Most of those workers were expected to move onto the company's massive new world headquarters in Overland Park, Kan., a campus so large it has its own zip code.

A proposed merger between WorldCom Inc. and Sprint fell apart last year when it failed to gain approval from the U.S. Justice Department and the European Union.