AT&T; Quarterly Profit Sets Mark; Writeoff Coming : * Telecommunications: The 26% gain shows its edge over long-distance rivals. A charge for restructuring its computer and phone equipment business could total up to $4 billion.
American Telephone & Telegraph on Thursday posted a record quarterly profit but warned that restructuring its computer and phone equipment business will result in a writeoff of as much as $4 billion later this year, one of the largest charges ever for a U.S. business.
Showing strong signs that it is beating back its long-distance rivals, AT&T; said its second-quarter profit totaled $828 million, 26% higher than in the year-ago period.
However, the nation’s largest long-distance company said its planned merger with computer maker NCR Corp. and other major business reorganizations and cutbacks expected later this year will result in the huge one-time, pretax charge against its 1991 profit.
Despite the magnitude of the writeoff--the second highest in company history--AT&T; officials stressed that the firm expects to show a profit for the year.
Investors appeared cheered by the news. AT&T; stock, the nation’s most widely held, rose $1.625 per share to close at $39.625 on the New York Stock Exchange, where it was the second most actively traded.
“The company’s restructurings reflect a very serious and well-contemplated effort to better position their computer and telecommunications equipment businesses,” said Frank Governalli, an analyst with First Boston. “This is a big plus.”
AT&T; officials said they expect to take a nearly $1.5-billion charge to cover the cost of folding AT&T;’s computer division into NCR, which AT&T; agreed in May to buy. The charge will cover the cost of laying off AT&T; computer operations employees, closing the phone firm’s computer facilities and writing down the value of its computer equipment not accepted for the newly merged NCR product line.
While that charge had been expected, the additional charges were not.
These will include a $1.5-billion charge to revamp AT&T;’s system for distributing its telecommunications equipment to businesses and a $1-billion charge to dispose of excess real estate. Since 1984, AT&T; has reduced its work force by more than 100,000 workers and has dozens of excess plants and office buildings.
In a conference call with analysts and reporters, the company said the total charges could range from $3.5 billion to $4 billion.
Analysts said AT&T; is doing well in the long-distance market battle and appears to be regaining customers previously lost to MCI and US Sprint.
The most recently available figures from the Federal Communications Commission put AT&T;’s share of the long-distance market at 63.1%, up slightly from the 62.2% low recorded in mid 1990. AT&T; said its long-distance volume grew 7% in the second quarter.
AT&T;’s latest quarterly profit compared to net of $657 million a year ago.
Meanwhile, MCI Communications, the nation’s No. 2 long-distance carrier, said its profit plunged 24% to $129 million from $170 million in the second quarter of 1990. Revenue rose 16% to $2.1 billion.
Nynex Corp., a regional phone firm, reported second-quarter net of $290.8 million, down slightly from $300.6 million for the same period last year.
BellSouth Corp., another regional, reported second-quarter net income of $365.3 million, compared to $445.2 million a year ago.
