Earnings Reports for July 25

Ameritrade Posts Mixed Results

Online discount broker Ameritrade reported a 91 percent increase in net revenues to $149 million for its second quarter, compared with $78 million in the same quarter last year.

But net income was $4.6 million, or 3 cents per share in the quarter ended June 30, compared with $8.9 million, or 5 cents per share in last year’s third quarter.

The company spent $41 million on advertising in the latest quarter, compared with $12 million in last year’s third quarter, and it spent $16.2 million developing its OnMoney subsidiary, compared with $1.6 million in the third quarter last year. The Web site OnMoney allows customers to organize their finances on the Internet.

Ameritrade, among the top 10 online brokers in number of trades, has been spending on advertising to develop its brand name and on technology to lower its costs per trade. Chief executive Tom Lewis said those investments are paying off, and the company added 186,000 accounts in the last quarter.

“We’re making investing a better customer experience by staying keenly focused on the needs of the self-directed investor,” Lewis said.


AT&T Meets Expectations

Quarterly profits at AT&T Corp.’s.and its new wireless group beat Wall Street forecasts, but the nation’s biggest long-distance and cable TV company didn’t convince some analysts that recent problems have been overcome.

AT&T said net profits totaled $1.75 billion or 53 cents a share in the second quarter, up nearly 10 percent from $1.59 billion or 49 cents a share in the same period in 1999.

Operating profits, which exclude certain one-time factors and AT&T’s stakes in Cablevision and ExciteAtHome, came to $1.88 billion or 57 cents a share, topping the consensus forecast of analysts polled by First Call/Thomson Financial.

Second-quarter revenue totaled $16.87 billion, if adjusted to include a full quarter from the MediaOne, the cable TV company that AT&T acquired in mid-June.

AT&T Wireless Group posted an unexpected profit of $22 million or 6 cents a share in an abbreviated second quarter that began April 27, when the company was created through an initial public offering of a separate stock representing AT&T’s mobile phone business and a new initiative to deliver calls and Web access to homes using “fixed wireless” antennas. Analysts had expected the wireless group, which is still fully owned by AT&T, to show a loss of 1 cent per share, according to First Call.

Wireless revenues grew 31.9 percent to $2.48 billion compared with a year-ago tally of $1.88 billion. The average monthly revenue per subscriber was $71.50, up from the $66.40 reported for the second quarter of 1999.

But aside from the wireless group’s stellar showing, the update wasn’t quite so encouraging as some analysts had hoped, especially in terms of the business services unit’s recovery from some first-quarter stumbles and the company’s decision to wait before making forecasts for next year.

Meanwhile, AT&T’s second-quarter report also provided an early peak at the customer response to the new PocketNet online service for mobile phones launched in May and the company’s limited trials with residential fixed wireless service.

At the end of the second quarter, there were more than 80,000 PocketNet users among AT&T’s 11.7 million mobile phone subscribers, a figure that has increased to more than 100,000 in July. AT&T declined to quantify how many of those customers were using the basic version of PocketNet, which is free, except to say that more than expected had signed up for premium services.

The fixed wireless service, introduced in the Dallas-Fort Worth area in March, now has about 2,800 customers using 6,000 phone lines and about 70 percent of whom also signed up for high-speed Internet service. The average monthly bill has been about $85 per month.


Chevron Profits Triple

Higher oil and gas prices fueled Chevron Corp. to a $1.1 billion second-quarter profit, keeping the company on course for the highest earnings in its long history.

The profit translated into $1.71 per share, more than tripling the San Francisco-based company’s earnings of $350 million, or 53 cents per share, from the same time last year. Second-quarter revenue totaled $13.2 billion, a 52 percent gain from $8.7 billion in revenue in the same 1999 period.

The results marked the first time Chevron has ever earned more than $1 billion in consecutive quarters. Through the first half of the year, Chevron earned $2.16 billion, up from $679 million at the same 1999 juncture.

Chevron’s results were in line with Wall Street’s expectations. Excluding $25 million in special charges, the company earned $1.75 per share. The consensus estimate of analysts polled by First Call/Thomson Financial was $1.74.

Like all oil companies, Chevron has been cashing on dramatically higher energy prices, much to the chagrin of motorists across the country.

Chevron’s collected its biggest windfall from crude oil production. The company’s average price for crude oil was $25.39, up 79 percent from the same 1999 period. Chevron Chairman David O’Reilly said the company derived 90 percent of its second-quarter profit from its exploration and production efforts.

Selling gasoline at the pump also generated hefty profits for Chevron, although not as much as motorists might have imagined—or as much as industry analysts would have liked to see.

Internationally, Chevron’s refining and marketing division struggled as the segment posted a profit of just $20 million, down 67 percent from the same quarter last year.

Chevron said its U.S. gasoline profit margins on the West Coast were actually lower in the second quarter this year because supplies were higher than last year when production slowdowns and shutdowns at several major California refineries drove up prices.

Rising natural gas prices also propelled Chevron during the quarter. The company’s price for natural gas averaged $3.35 per thousand cubic feet in the second quarter, a 63 percent increase from last year.

Despite Chevron’s banner year, investors continue to shun the company’s shares, as well as those of other oil giants. Entering Tuesday’s trading, Chevron’s stock was down by 11 percent so far this year.

In an effort to boost its stock, Chevron has been buying back its own shares.


Compaq Returns to Profitability

Compaq Computer Corp., the No. 1 personal computer maker, posted a second-quarter net profit versus a loss last year, meeting Wall Street expectations and returning its commercial personal computer sales unit to profitability ahead of schedule.

The Houston-based company reported net income of $387 million, or 22 cents per share, compared with a loss of $184 million, or 10 cents, in the year-earlier quarter. Revenues rose 8 percent to $10.1 billion.

Excluding $25 million in investment gains, earnings per diluted share were 21 cents in the 2000 second quarter.

Wall Street analysts on average had expected the company to earn 21 cents per share, according to First Call/Thomson Financial, which compiles brokerage estimates. Michael Capellas, president and chief executive, said he expected a stronger second half, meeting financial targets set for the third and fourth quarters. “We’re focused on delivering innovative technology, improving profitability and increasing operational efficiency, he said. ”

Compaq’s commercial personal computing group generated revenue of $3.3 billion, an increase of 3 percent year-over-year. The group returned to profitability in the second quarter — a quarter ahead of schedule—posting an operating profit of $62 million. That represents an improvement of $286 million over the second quarter 1999.

Commercial PC products accounted for 33 percent of second-quarter revenue.

Second-quarter gross margin, or gross profit expressed as a percentage of revenue, rose by 3 percentage points to 23.6 percent.


Earnings Up at eBay

Operating results for Internet auctioneer eBay Inc. beat Wall Street expectations as the company expanded its service around the world and shrugged off computer server problems that plagued it a year ago. For the three months ended June 30, eBay earned $11.6 million, or 4 cents a share, compared to $816,000, or break-even, adjusted for a stock-split in the comparable period a year ago. Revenues nearly doubled to $97.4 million from $49.5 million.

Analysts surveyed by First Call/Thomson Financial had predicted earnings of 3 cents a share.

The current quarter included charges for employee and executive stock plans and merger-related costs. Excluding those, income was $13.2 million, or 5 cents a share.

Executives with the San Jose, Calif.-based company reported that the number of registered users grew to 15.8 million by the end of June, up 12.6 million in the previous quarter and 5.6 million a year ago.

Analysts say eBay is continuing to hold off competition from Yahoo! Inc. and Amazon.com by offering expanded services such as one introduced in the quarter for small businesses and a site for selling used automobiles.

EBay makes money by positioning itself as a neutral party that charges auctioneers for listings and taking a percentage of each sale. The company last year suffered a series of embarrassing crashes and slowdowns on its site but has since poured millions of dollars into upgrading its systems to handle the crush of users who log on for one-time “event” sales.


Exxon Mobil Hits a Gusher

Exxon Mobil Corp. said second-quarter earnings more than doubed on the strength of higher oil prices and better profit margins on gasoline. The oil giant said second-quarter profit, excluding special charges and merger expenses, rose to $4.15 billion, or $1.18 a share, from $1.86 billion, or 53 cents, in the same period last year on a pro forma basis. Second-quarter revenue climbed to $55.96 billion from $43.28 billion in the year earlier period.

Analysts surveyed by First Call/Thomson Financial were forecasting earnings of $1.07 a share for the company, which completed its acquisition of Mobil late last year.

Still, stronger commodity prices pushed earnings from its exploration and production business to a record $2.8 billion, up from $1.1 billion in the second quarter of last year. The company also said capital and exploration spending rose 10 percent from the first quarter to $2.4 billion and will continue to increase over the remainder of the year.

Its downstream, or refining and marketing business, also posted stronger numbers alongside healthier profits margins on gasoline and other fuels. Exxon Mobil, which has sold its oil refinery in Benicia, California and a string of retail stations to meet anti-trust requirements, said income from its refining and marketing arm rose to $998 million from $478 million. Overall, it said first half operating costs, excluding merger expenses, were down about $800 million from the first half of last year.


McDonald’s Matches Expectations

McDonald’s Corp. said second quarter net income rose a modest 2 percent, meeting Wall Street expectations. The globes biggest fast-food chain predicted better sales and operating earnings in the second half of the year.

Net income in the quarter rose to $525.9 million, or 39 cents a diluted share, compared with $518.1 million, or 37 cents, in same quarter a year-ago.

Analysts had expected the burger giant to report a profit of 39 cents a share, according to First Call/Thomson Financial, which tracks earnings data.

“Second quarter growth was affected by challenging year-over-year comparisons, due to exceptional performance in several key markets in 1999,” said Jack Greenberg, McDonald’s chairman and chief executive.

Systemwide sales, or sales at company-owned and franchised restaurants, rose 3 percent to $10.2 billion from $9.9 billion in the 1999 second quarter.

Sales in the United States were flat for the quarter at $5.2 billion as gains from restaurant expansion were offset by lower same-store sales.

U.S. sales in the quarter were hurt by a decline in the popularity of McDonald’s Teenie Beanie Babies toy promotion. The promotion was held in both the 2000 and 1999 second quarters, but enthusiasm for the small plush toys was not as great this year, the company said.

In Europe, operating income fell 7 percent to $281.5 million as weak results in Germany had a significant impact. Excluding the effect of currency translation, Europe’s operating income rose 3 percent.

Sales in Europe during the second quarter fell 3 percent to $2.3 billion. On a constant currency basis, European sales rose 7 percent.


Nortel Reports Earnings Growth

Nortel Networks Corp., the world’s No. 2 network equipment supplier, cited surging demand for its fiber-optic, Internet and wireless equipment in reporting second-quarter earnings that surpassed its performance in the same period a year ago. Nortel said its profit from operations, excluding one-time charges, rose to $561 million, or 18 cents a share, from $320 million, or 11 cents a share, in the year earlier quarter.

Brokers polled by First Call/Thomson Financial estimated the profit at 14 cents a share. The consensus of brokers surveyed by IBES forecasting service was for 14 cents.

Including acquisition costs, Nortel reported a net loss of $745 million, or 26 cents a share, compared with a net loss of $258 million, or 10 cents a share, last year. Second-quarter revenues grew 48 percent to $7.8 billion from $5.3 billion last year.

Nortel also said it expects sales in 2000 to grow in the low 40 percent range, up from a previous estimate of 30-35 percent, and that growth in earnings per share from operations will be in the high 30 percent range. Chief financial officer Frank Dunn said Nortel will outpace market growth rate of 20 percent in 2001, with revenues and earnings per share from operations increasing in the 30 percent to 35 percent range.

Nortel, which earlier this week said it will spend $1.9 billion to more than double fiber-optic manufacturing capacity, is in talks to sell its fiber-optic parts business to Corning Inc. Reports suggest that a stock swap worth more than $100 billion would result in Nortel owning more than 50 percent of Corning, while Corning would own the optical parts unit and maintain its independence.


Schering-Plough Meets Expectations

Drug manufacturer Schering-Plough Corp., citing healthy international sales of its Claritin hay fever medicine and other products, said second-quarter earnings climbed to 43 cents a share, a 16 percent increase over the same period last year.

Sales were $2.6 billion, up 8 percent from 1999, the company said. Worldwide sales of antihistamine Claritin were up 9 percent, to $897 million. Net income was $634 million, up from $547 million in 1999.

For the first half of the year, meanwhile, the company posted earnings per share of 85 cents, up 16 percent, on net income of $1.3 billion.

“Driven by worldwide growth in pharmaceuticals, Schering-Plough turned in another solid performance in the second quarter, despite the negative impact of foreign exchange,” said Richard Jay Kogan, chairman and chief executive.


The Associated Press and Reuters contributed to this report.