AT&T; Net Drops, GTE Posts Loss in Quarter
American Telephone & Telegraph Co. and GTE Corp. on Tuesday both reported suffering a difficult fourth quarter.
AT&T; said that its net income fell 1.6% in the last three months of 1985, compared to a year earlier. It was the first such decline that AT&T; has reported since the Bell System breakup.
Financial analysts had expected the nation’s largest telephone company to report substantially higher profits. They said the earnings decline apparently came from the high cost of introducing new products that eventually will prove profitable.
Meanwhile, GTE said Tuesday that it had a fourth-quarter net loss of $1 billion, the result of a previously announced restructuring charge taken mostly to reduce the value of assets of its Sprint long-distance division. The quarter resulted in GTE recording its first annual loss ever.
AT&T; said it earned $364 million in the fourth quarter of 1985, down from $370 million a year earlier. Its earnings per share slipped 1 cent to 32 cents.
Hint to Shareholders
The earnings per share of 32 cents barely exceeds the 30 cents a share that AT&T; pays in quarterly dividends. AT&T; hinted to shareholders in a bulletin that it would preserve the dividend, calling the 30-cent rate “sustainable.”
For all of 1985, AT&T; said it earned $1.56 billion, up 13.6% from $1.37 billion in 1984. AT&T; said its revenue for all of 1985 was $34.91 billion, up from $33.19 billion in 1984.
AT&T; revenue in the fourth-quarter rose 8.4% to $9.12 billion, the highest since the breakup. AT&T; said it posted “significant” gains in 1985 sales in such areas as central office switching equipment, key telephone systems, large and mid-size private branch exchanges and fiber-optic cable.
“We’re doing better, but the difficulties of rebuilding from divestiture persist and consequently our financial performance continues to fall short of our expectations,” AT&T; Chairman Charles Brown said in a news release.
AT&T; laid off 20,000 employees in 1985 and has expanded into the information-processing field in search of new sources of profits since it was divested of the Bell operating companies on Jan. 1, 1984.
Spin-Off of Sprint
GTE’s fourth-quarter performance was foreshadowed earlier this month when the company announced that it was spinning off its money-losing Sprint unit into a joint venture with United Telecommunications. The same day, the company said it was joining with Siemens AG to develop, produce and market digital telecommunications switching equipment.
The fourth-quarter charge totaled $1.3 billion to cover the reduction in Sprint assets and a business repositioning associated with the partnerships.
The charge more than offset operating earnings of $283 million in the quarter, GTE said.
GTE showed a loss of $1.01 billion for the quarter, compared to a profit of $243.3 million a year earlier. Fourth-quarter revenue rose 9% to $4.2 billion.
For the year, GTE posted a net loss of $161 million, compared to a profit of $1.13 billion in 1984. Annual revenue rose 8% to $15.7 billion.
According to Theodore Brophy, chairman of GTE, the 1985 charge to earnings will not impair the company’s current cash position, harm current dividend payments or hinder the company’s long-term dividend.
GTE telephone revenue was up 10% to $10 billion for the year. GTE is the parent of Santa Monica-based General Telephone of California.
Long-distance calling increased 10% over 1984, compared to a 6% increase recorded in that year.
The communications services group, which includes GTE Sprint and GTE Telenet, reported operating losses for the year of $245 million, compared to a gain of $67 million in 1984. The unfavorable results were due primarily to higher access costs and marketing expenses for Sprint.
Also Tuesday, US West of Denver, one of the seven regional Baby Bell companies created by the breakup of AT&T;, said it earned $232.9 million in the fourth quarter, down 7.8% from $252.6 million a year earlier.
US West said its lower fourth-quarter profit came on revenue of $2 billion, compared to $1.88 billion a year earlier. The company said its quarterly earnings suffered because of several one-time gains in the 1984 fourth quarter.
US West owns Mountain Bell, Northwestern Bell, Pacific Northwest Bell and a variety of other companies involved in such fields as marketing business communication products, cellular mobile phone service, directory publishing, real estate and financial services.
