Earnings Reports for Jan. 29

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AT&T's Profits Fall 51 Percent

Telephone and cable televisiongiant AT&T posted today a 51 percent drop infourth-quarter profits due to intense competition and fallingprices in the long-distance telephone market, and said itexpects consumer revenues to continue to shrink.

Separately, Rick Roscitt, head of AT&T's Business Servicesunit, said he will become chairman and chief executive ofequipment maker ADC Telecommunications Inc. Roscitt's departuremarks the latest high-level executive to leave the company inthe past three years.

AT&T, which plans to break into four separately tradedcompanies, said fourth-quarter profits, excluding one-timeitems, fell to $978 million, or 26 cents a share, from $1.7billion, 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&Tslashed its growth outlook several times last year, citingweakness in the long-distance telephone market.

Including one-time items, AT&T posted a net loss of $1.7billion, or 45 cents a share, in the quarter, compared with aprofit of $1.15 billion, or 36 cents a share, a year ago.

Fourth-quarter revenue increased 3 percent to $16.9billion. Operating expenses jumped 52 percent to $21.2billion.

Shares of New York-based AT&T have fallen 53 percent overthe past year, underperforming the Standard & Poor's 500 Indexby 49 percent. AT&T last month cut its dividend for the firsttime in the company's more than 100-year history, slashing thepayout by 83 percent.

Excluding the planned exchange offer for its wireless unit,AT&T said it expects first-quarter earnings, excluding otherincome, to be in the range of 4 cents to 7 cents a share. AT&Tsaid it was not able to accurately estimate full-year revenue,earnings, and cash-flow for the company as a whole due to thepending restructuring.

"We were expecting a bad quarter and a bad year in 2001 andit's going to be worse than we expected," said Anna-MariaKovacs, a Boston analyst with the Janney Montgomery Scottbrokerage.

Kovacs, who has a "sell" rating on AT&T, said AT&T'sreduced forecast for 2001 EBITDA (earnings before interest,taxes, depreciation and amortization) for business services andcrumbling revenues from consumer long-distance were key reasonsfor her outlook.

Under AT&T's restructuring plan, which was announced inOctober, the company will split its major units — consumer,business, broadband, and wireless — into separately tradedcompanies.

The move dismantles nearly three years of bold acquisitionsand reverses the company's strategy to become an "all distance"communications company that sold packages of local,long-distance, wireless telephone and Internet accessservices.

In the fourth-quarter, AT&T's core consumer revenues fell14.7 percent to $4.3 billion. For 2001, the consumer unit's proforma revenues should fall by mid- to high-teen rates due tocontinued customer migration to lower priced calling plans andprepaid card products, competition from more Baby Bellsentering the long distance market, and a switch by customers towireless telephones.

AT&T's fourth-quarter business revenues increased 0.7percent to $7.1 billion. The business services unit should posta "slight revenue decline" in the first quarter, and flatrevenues for the full year 2001, the company said. It citedcontinued long-distance pricing pressure, volume erosion due totechnology substitution, and changes in its product mix.

Its wireless unit's fourth-quarter revenues increased 39.1percent to $3.0 billion as it added 865,000 new subscribers. Ithad 15.2 million subscribers at the end of 2000, an increase of58.5 percent compared with a year-ago.

The wireless unit expects service revenues to grow at thehigh-end of the 30 — 35 percent range for the full year 2001.Growth in earnings before interest, taxes, depreciation andamortization (EBITDA), excluding other income, is expected tobe in the mid-60 percent range.

Wireless subscribers additions will grow by mid- to high-20-percent rates in the first quarter. Full-year wirelesssubscriber growth is expected to be around 20 percent.

The broadband unit, which includes AT&T's recently acquiredcable television businesses, saw a 11.8 percent increase infourth-quarter revenues.BACK TO TOP

Higher Energy Costs Lower Union Carbide's Results

Chemicals manufacturer Union Carbide reported today a fourth-quarter loss, blamingthe slowing U.S. economy and the high costs of energy and rawmaterials.

The Danbury, Conn.-based company, which has agreed to beacquired by Dow Chemical, said it lost $94 million,or 70 cents a share in the quarter, compared with earnings of$94 million, or 68 cents a share, in the corresponding period ayear earlier.

Excluding a charge of $31 million, or 17 cents a share,related to a partnership with Honeywell International Inc., thecompany said it lost 53 cents per share forthe quarter.

Wall Street analysts polled by First Call/Thomson Financialhad expected the company to lose 53 cents in the quarter, afterthey lowered their estimates earlier this month when UnionCarbide issued an earnings warning.

Before the warning, Wall Street had been expecting a moremodest loss of 20 cents a share.

Revenues rose to $1.598 billion compared with $1.552billion for last year's fourth quarter.

"Carbide and others are being negatively impacted by avolatile energy market," said William Joyce, Union Carbide'schairman and chief executive.

"At the same time, product selling prices have notbeen keeping pace with the high cost of natural gas and naturalgas liquids," he added.

Joyce said raw material and energy costs rose tounprecedented levels by the end of the quarter, while averageselling prices were lower than in the prior quarter. Thenegative impact on earnings was primarily in its NorthAmerican-based basic chemicals and polymers businesses.

He noted that natural gas prices more than quadrupled fromDecember 1999 to the end of December 2000, while the price forethane nearly doubled and the cost of propane increased nearly40 percent in the same period.

Union Carbide is the latest in a string of chemicalcompanies to report that high energy costs took a bite out offourth-quarter earnings, joining DuPont Co., Dow, and others.

Meanwhile, Union Carbide and Dow are waiting for regulatoryapproval for their merger, which they had hoped to close bythis time a year ago. Mike Parker, Dow's president and chiefexecutive officer, said last week that he remained committed tothe transaction, describing it as a "very good deal."

The companies have not given a new target date for closingthe deal.

For the full year 2000, Union Carbide posted net income of$162 million, or $1.18 per diluted share. Along with the 17cents a share charge related to its partnership, full-yearresults included gains of 48 cents a share. Prior year netincome was $291 million, or $2.13 per diluted share.BACK TO TOP

Xerox Posts Second Straight Quarterly Loss

Struggling copier giantXerox reported today its second-straight quarterlyloss and said it will cut 4,000 jobs in the first quarter,about 4 percent of its workforce, with more job cuts plannedlater this year in an effort to get back on track.

Stamford, Conn.-based Xerox, which warned on Dec. 21 thatthe fourth quarter was looking even worse than the thirdquarter — when it posted its first quarterly loss in 16 years— said its loss for the fourth quarter was $198 million, or 31cents per diluted share, compared to earnings of $294 million,or 41 cents per share, in the year-earlier period.

Analysts on average were forecasting a loss of 30 cents,according to consensus estimates compiled by First Call/ThomsonFinancial.

Xerox, which has promised to sell up to $4 billion inassets and cut $1 billion in costs this year in a bid toimprove its finances, said fourth-quarter revenue fell 13percent from $5.4 billion in the year-ago quarter.