AT&T's Profits Fall 51 Percent
Telephone and cable television giant AT&T posted today a 51 percent drop in fourth-quarter profits due to intense competition and falling prices in the long-distance telephone market, and said it expects consumer revenues to continue to shrink.
Separately, Rick Roscitt, head of AT&T's Business Services unit, said he will become chairman and chief executive of equipment maker ADC Telecommunications Inc. Roscitt's departure marks the latest high-level executive to leave the company in the past three years.
AT&T, which plans to break into four separately traded companies, said fourth-quarter profits, excluding one-time items, fell to $978 million, or 26 cents a share, from $1.7 billion, or 53 cents a share, a year ago. On a per-share basis, the fall was 51 percent. On the basis of millions of dollars, the drop was 42 percent.
The results matched Wall Street's reduced expectations, according to research firm First Call/Thomson Financial. AT&T slashed its growth outlook several times last year, citing weakness in the long-distance telephone market.
Including one-time items, AT&T posted a net loss of $1.7 billion, or 45 cents a share, in the quarter, compared with a profit of $1.15 billion, or 36 cents a share, a year ago.
Fourth-quarter revenue increased 3 percent to $16.9 billion. Operating expenses jumped 52 percent to $21.2 billion.
Shares of New York-based AT&T have fallen 53 percent over the past year, underperforming the Standard & Poor's 500 Index by 49 percent. AT&T last month cut its dividend for the first time in the company's more than 100-year history, slashing the payout by 83 percent.
Excluding the planned exchange offer for its wireless unit, AT&T said it expects first-quarter earnings, excluding other income, to be in the range of 4 cents to 7 cents a share. AT&T said it was not able to accurately estimate full-year revenue, earnings, and cash-flow for the company as a whole due to the pending restructuring.
"We were expecting a bad quarter and a bad year in 2001 and it's going to be worse than we expected," said Anna-Maria Kovacs, a Boston analyst with the Janney Montgomery Scott brokerage.
Kovacs, who has a "sell" rating on AT&T, said AT&T's reduced forecast for 2001 EBITDA (earnings before interest, taxes, depreciation and amortization) for business services and crumbling revenues from consumer long-distance were key reasons for her outlook.
Under AT&T's restructuring plan, which was announced in October, the company will split its major units — consumer, business, broadband, and wireless — into separately traded companies.
The move dismantles nearly three years of bold acquisitions and reverses the company's strategy to become an "all distance" communications company that sold packages of local, long-distance, wireless telephone and Internet access services.
In the fourth-quarter, AT&T's core consumer revenues fell 14.7 percent to $4.3 billion. For 2001, the consumer unit's pro forma revenues should fall by mid- to high-teen rates due to continued customer migration to lower priced calling plans and prepaid card products, competition from more Baby Bells entering the long distance market, and a switch by customers to wireless telephones.