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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: January 2, 1996
AT&T CORP.
A New York Commission File I.R.S. Employer
Corporation No. 1-1105 No. 13-4924710
32 Avenue of the Americas, New York, New York 10013-2412
Telephone Number (212) 387-5400
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Form 8-K AT&T Corp.
January 2, 1996
Item 5. Other Events.
See Exhibit 99 to this Form 8-K.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 99 AT&T Corp. Press Release issued
January 2, 1996.
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Form 8-K AT&T Corp.
January 2, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
AT&T CORP.
By: S. L. Prendergast
Vice President and Treasurer
January 2, 1996
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EXHIBIT INDEX
Exhibit
Number
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99 AT&T Corp. Press Release issued January 2, 1996.
<PAGE> 1 Exhibit 99
AT&T TO TAKE AFTER-TAX CHARGE OF ABOUT $4 BILLION TO COVER
NEARLY 40,000 JOB REDUCTIONS, OTHER ACTIONS
FOR RELEASE: TUESDAY, JANUARY 2, 1996
NEW YORK -- AT&T said today it would take a post-tax charge
of approximately $4 billion against fourth-quarter earnings to
cover the costs of implementing refocused strategies and actions
designed to increase its competitiveness and efficiency as it
restructures into three independent companies.
The expenses include reductions of nearly 40,000 jobs over
three years, with about 70 percent completed by the end of 1996.
However, because more than 6,500 managers have taken a voluntary
severance package and about 4,000 other employees could be moving
with units AT&T intends to divest, involuntary reductions during
the period are expected to be about 30,000. Extension of the
voluntary separation offer to additional employees may further
decrease the number of involuntary reductions necessary.
The charge will be approximately $6 billion before taxes and
will reduce fourth quarter net income by approximately $4 billion
or about $2.50 a share. The company said it will report final
numbers when it closes its books later this month. AT&T's
earnings for the first nine months of 1995 were $2.82
billion or $1.77 per share. For 1994, profits were $4.7 billion
or $3.01 per share.
"The reduction in our workforce will be the most difficult
and painful step we've had to take in this restructuring
process," said AT&T Chairman Robert E. Allen. "Compassion will be
an essential ingredient in the handling of the job cuts that are
part of today's announcement. But I believe the reductions and
other actions are absolutely essential if our businesses are to
be competitive.
"This is a key milestone that puts us right on track in our
plan to create three new companies that will be positioned as
strongly as possible to succeed in their markets."
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Allen emphasized that the company will stay focused on
customers and their needs during the transition. He also
reiterated his personal commitment that AT&T will help the
employees who leave do so with dignity and support.
The actions included in the charge announced today primarily
affect the new AT&T company, which will provide
telecommunications services, and the systems and technology
company, which will provide network, business and consumer
technology and equipment. The third company, AT&T Global
Information Solutions, the computer unit, said in September it
would eliminate 8,500 jobs in 1995 and 1996 and AT&T took a
post-tax charge of $1.17 billion to third-quarter earnings for
this and other actions to strengthen the company.
The fourth-quarter charges include:
- Force reductions resulting in severance pay and related
costs estimated to be about $2.6 billion before taxes.
- Writing down the value of assets. Total costs for these
activities are an estimated $1.7 billion.
- Closing, selling or consolidating facilities that are not
strategic to the new companies' future operations, including
costs for lease terminations. Total costs for all these
activities amount to approximately $1.1 billion of the charge.
- Other actions totaling nearly $700 million.
Examples of company-wide actions include: Reduction of
corporate staff organizations and costs associated with early
termination of building leases related to the reduction of
employees and consolidation of operations.
Examples of actions in the new AT&T company include: Force
reductions resulting from the continued application of technology
in operations and support functions throughout the new company
and reductions in marketing and sales support positions as it
streamlines the number of service offerings for businesses.
The new AT&T also intends to reduce the value of some
investments, including Unitel, its Canadian telecommunications
venture, and for several international units where it is
restructuring the operations of those companies. Plans also
include modifying several of the company's on-line services to
Internet-based technical platforms and modifying some of its
messaging services, which will require writing down the value of
some proprietary software and hardware. It will also write down
the value of some unneeded network facilities -- such as
microwave towers -- and refocus some of its undersea cable
operations.
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Examples of actions in the systems and technology company
include:Force reductions resulting from a number of initiatives
across the business, including consolidating back-office support
in engineering and installation offices around the world;
consolidating and streamlining product- and market-management
functions in Network Systems; moving support closer to the
customer by reducing U.S. based support for international
operations, and reducing the centralized support for
manufacturing operations.
Asset writedowns for the systems and technology company
include the previously announced plan to sell the company's
Paradyne unit and consolidation of its material distribution
operations. Also included are costs for restructuring its
consumer products business as it implements a number of
major process improvements in 1996 and 1997 in how it designs,
manufactures and distributes those products. The company will
also consolidate its Network Systems and Global Business
Communications Systems offices outside the U.S. for greater
efficiency, and consolidate and centralize several customer
operations locations around the world, as well as consolidate and
upgrade several manufacturing operations outside the U.S.
AT&T said it would provide further details on the specific
actions included in the charges as the activities are
implemented. The company said it does not intend to provide
details on force reductions by country, state or company facility
until it is able to notify affected employees and local
communities. However, it noted that New Jersey, with about 48,000
of the company's approximately 300,000 employees, would see
reductions of about 6,000 to 7,000 jobs.
AT&T added that the companies will continue to have a major
presence in the state, with a combined employee population of
more than 40,000. The operating headquarters of the new AT&T
will continue to be based in Basking Ridge; the systems and
technology company has announced that its global headquarters
will be in Murray Hill and Bell Laboratories will continue to
have major facilities in both Murray Hill and Holmdel.
If the two new companies were launched today and included
all force reductions contemplated, the estimate of the size and
the number of force reductions are: New AT&T -- 110,000
employees, after force reductions of about 17,000; systems and
technology company -- 108,000 employees, after force reductions
of 23,000.
The company said that the total force reductions include
about 10,000 corporate-wide staff jobs in functions such as
information systems, human resources and financial operations
that were needed to manage AT&T as a large integrated enterprise
as well as support its many decentralized units. The remaining
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reductions will occur within the operating units of the two new
companies and include about 6,000 administrative and back office
support positions. The vast majority of the job cuts will be in
U.S.- based operations.
In a personal message delivered to employees via electronic
mail and audiotape and posted to the company's Internet
homepage, Allen said the job reductions "are being driven by
changes in our marketplace --changes in customer needs,
technology and public policy -- not through any fault of the
people who will leave."
To prepare for the job cuts, AT&T on November 15, 1995,
began offering voluntary separation packages to nearly 72,000
managers who had until December 29, 1995, to accept. Under the
voluntary or involuntary programs, managers receive lump-sum
payments ranging from five to 35 weeks of salary, based on a
manager's age and years with the company; an additional 20
percent of the lump sum; up to $10,000 for education, retraining,
relocation to take a job elsewhere, or to begin a business, and
a way for managers within two years of retirement to bridge the
remaining time to pension eligibility. In addition, managers
receive eight weeks of pay under the voluntary plan.
Non-management workers, who are declared surplus and who are
covered by labor agreements and comparable other policies, can
receive from one to 104 weeks' pay, based on seniority.
Allen also noted that the process to launch the companies
was on schedule. AT&T has filed a request with the IRS for a
ruling that the spinoff of the systems and technology company
will be tax-free; named senior officers for the new companies;
is on track to file with the Securities and Exchange Commission
for an initial public stock offering for the systems and
technology company, and still expects to complete the
transactions by the end of 1996.
AT&T said it would hold a one-way conference call for the
investment community and the news media at 11 a.m. Eastern
standard time with Rick Miller, senior executive vice president
and chief financial officer and a member of the steering
committee overseeing the restructuring, who will provide
additional details on the actions announced today. The number for
U.S. callers is 1-800-260-0718. Callers outside the U.S. can dial
602-872-2632. The call will be replayed beginning at 2 p.m. today
until midnight Wednesday, January 3. U.S. callers may dial
1-800-475-6701; outside the U.S., the number is 612-365-3844
(enter code 606300 to hear the rebroadcast).
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