Earnings : AT&T;’s $2.7-Billion Profit Is Its Best Since Breakup

American Telephone & Telegraph, which in 1988 paid the price of competition by suffering its first-ever loss, rebounded handsomely last year by recording its strongest performance since the breakup of the Bell System, the company said Thursday.

Strong fourth-quarter earnings of $705 million--contrasted with a $3.34-billion loss in the corresponding period a year ago--brought 1989 profit to $2.7 billion, the best since the 1984 breakup when AT&T; settled an antitrust lawsuit by giving up its local telephone business.

Revenue barely increased for the quarter, to $9.30 billion from $9.21 billion a year earlier. That boosted annual revenue to $36.11 billion, up 2.6%. In 1988, the company reported a loss of $1.67 billion.

In 1988’s fourth quarter, AT&T; chose to take a $6.7-billion one-time charge against its earnings to speed modernization of its ubiquitous but aging telecommunications network. The move was spurred by the improved quality of transmissions offered by AT&T;’s chief competitors, MCI Communications and US Sprint. AT&T; also cut costs by consolidating operations and cutting jobs.

Without that $6.7-billion charge, AT&T; said it would have earned $593 million in 1988’s fourth quarter and $2.27 billion for the year--still 19% less than 1989’s performances for both the quarter and the year.

“It was a year in which AT&T; became a trimmer, more responsive and more aggressive competitor,” Chairman Robert E. Allen said of the 1989 performance. Despite stiffening competition and signs of a softening economy, Allen insisted that AT&T; is “increasingly well positioned to meet those challenges.”

Analysts had largely expected the results and generally agreed with Allen’s assessment that AT&T; is far more competitive than in the days of monopolistic old Ma Bell.

“It’s reassuring that they had at least maintained their revenues in the light of the competition they’ve been facing,” said Mark Brandstein, who follows telecommunications for the Yankee Group in Boston. “They’re learning how to become a lot more competitive.”

David Boczar, an industry analyst with New Japan Securities in New York, said earnings are “on track.” He added, “We feel comfortable that AT&T; will be able to meet its objective for an earnings growth of 20% to 25% in 1990.”

On the computer side, which had been disappointing, revenue rose for the quarter and the year mainly because of increased demand for AT&T;’s personal computers and work stations, the company said. AT&T; won a computing contract with the Transportation Department last month that has a potential value of $850 million over eight years, the company said.

HOW AT&T; HAS FARED

Here is a summary of American Telephone & Telegraph’s performance since the breakup of the Bell system in 1984. Figures are in billions. Loss shown in parentheses.

1984 1985 1986 1987 1988 1989 Revenue $33.19 34.50 34.21 33.77 35.21 36.11 Profit $1.37 1.56 0.14 2.04 (1.67) 2.70

Source: AT&T;