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Instant Analysis: Sprint Cuts at Least 2,500 Jobs

By Eric Volkman - Jan 26, 2016 at 10:12PM

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The ax has fallen at company headquarters, in addition to several customer care centers.

What happened?
A host of jobs at Sprint (S) have been cut. The company said that it has eliminated over 2,500 positions within its organization. The jobs were at Sprint headquarters in Kansas, plus six customer care centers around the country. Sprint said it notified the affected employees last week via email, and informed them about the severance packages they were eligible to receive.

The cuts are part of a broader company initiative aimed at saving up to $2.5 billion in costs. This program, announced last October, covers network expenses, information technology, and other items in addition to labor costs.

At the beginning of this year, Sprint's employee count was approximately 33,000.

Does it matter?
Layoffs affecting thousands of workers are, of course, never good news. Sprint has been struggling for years in a crowded marketplace -- it's bringing up the rear among the incumbent foursome of itself, T-Mobile (TMUS 0.69%), Verizon, and AT&T -- and has a lengthening streak of net losses behind it.

That said, in its most recently reported quarter, the pool of red ink wasn't as massive as expected, at $836 million -- $0.21 per share against the average analyst expectation of $0.25. Certain figures were downright encouraging, such as the over 500,000 postpaid subscriber additions the company recorded during the quarter, and the sizable boost in EBITDA guidance for fiscal 2015.

But that bottom-line figure is still well in negative territory. By contrast, scrappy T-Mobile managed to land in the black in its Q3, netting $138 million on $6.3 billion in revenue (an 11% improvement on a year-over-year basis). Crucially, T-Mobile has also managed to expand its network significantly of late, putting even more distance between itself and Sprint.

Since Sprint's cost-saving initiative is only a few months old, it remains to be seen how effective the moves like the layoffs will ultimately be. Perhaps it will end up righting the ship; investors will certainly be hoping for such an outcome. The next few months will give us a clearer picture of whether the program is improving results to any notable degree.

Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Verizon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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