AT&T; Reports 1987 Income of $2 Billion

American Telephone & Telegraph, proclaiming 1987 its best year since the breakup the Bell System, reported record earnings Wednesday that were fueled by a strong last quarter and buttressed by a cost-cutting drive that slashed $1 billion from expenses.

“It was a breakthrough year,” said James E. Olson, AT&T;’s chairman.

By whatever characterization, the 1987 profit of $2.04 billion was far greater than the $139 million earned the previous year and came despite a drop in overall revenue.

Olson’s description of a “breakthrough year” also reflects the emergence of a company overhauled through a massive and painful restructuring program that will ultimately cost 32,000 jobs and, in 1986, drained $1.7 billion from AT&T;’s bottom line.

Despite the heavy cost cutting, Olson said AT&T; intends to “continue to wring costs from our operations.” He cited as particular targets product costs and administrative expenses.

AT&T;’s earnings report was in line with analysts’ expectations, and the company’s shares closed unchanged at $28.875 in composite trading on the New York Stock Exchange, where it was Wednesday’s sixth most actively traded stock. Analysts also agreed that the restructuring program has paid off.

“The real question is what happens from now on,” said Daniel F. Zinsser, a telecommunications analyst at Goldman Sachs. “We don’t think there’s that much cost cutting left to do. They now need more revenue.”

Revenue grew only slightly in the quarter--$8.60 billion, compared to $8.53 billion a year earlier. But the modest increase was particularly welcome because revenue for the year declined a bit to $33.60 billion from $34.09 billion in 1986. This was due mainly, the company said, to the anticipated continuing decline in phone rentals, particularly by businesses buying their own systems. (Setting rental revenue aside boosts 1987 revenue for services and products $579 million above 1986, the company noted.)

Tax Benefit

“We are especially pleased to post fourth-quarter revenue of $8.60 billion, our highest quarterly revenue in nearly two years,” Olson said in a statement. The chairman also pointed to increased sales of computer and telecommunications products, which had lagged behind continued strong revenue growth from AT&T;’s long-distance telecommunications services (which also increased 5% for the quarter and 2.9% for the year). Earnings also benefited from the Tax Reform Act of 1986, he said.

AT&T; had fourth-quarter net income of $498 million, contrasted with a $1.17-billion loss taken in the last quarter of 1986.