AT&T; Ends ’92 With a $1-Billion Quarter : Communications: Ma Bell’s profit for the year tops $3.8 billion. Analysts credit savvy actions by management.
Offering the strongest evidence yet that century-old Ma Bell is neither too big nor too old to prosper, American Telephone & Telegraph Co. on Thursday reported fourth-quarter earnings of $1 billion, making it more profitable than all but the largest oil companies.
The quarterly profit was 57% higher than the prior year’s $635 million, and helped the world’s largest telephone company produce total 1992 earnings of $3.81 billion. That was more than seven times the $522-million profit for 1991, when huge restructuring charges were taken.
AT&T;’s results are in stark contrast to those of other American business giants, such as International Business Machines Corp., which last week reported a $4.96-billion loss for 1992, and General Motors Corp. and Ford Motor Co., which are expected to also report losses for 1992 next month.
“AT&T; could have easily ended up like an IBM, General Motors or Sears or Westinghouse,” said analyst Gregory Sawers of the New York brokerage firm Sanford C. Bernstein. “Credit goes to the actions of its management. They addressed the cost problem early and significantly. They made some good acquisitions and provided a good definition of their business.”
AT&T; also profited from the fact that the telecommunications industry--unlike retailing, autos and computers--is one of the strongest and fastest growing in the world.
Wall Street analysts give AT&T; high marks for its overall performance since the 1984 divestiture of its regional Bell telephone companies.
The company’s recent moves, including its aggressive acquisition of computer maker NCR Corp. in 1991 and its planned investment in McCaw Cellular later this year, have provided the pieces needed to become the leader as the industry absorbs both wireless communication and computer networking, analysts say.
“Over the next 10 to 15 years, we’ll see the convergence of computers and communications, and AT&T; is positioned well,” said Blake Bath, another Bernstein analyst.
Five years ago, the picture wasn’t as rosy. AT&T; looked much like the IBM of today: an unprofitable, cumbersome company with many layers of entrenched management.
Analysts generally credit AT&T; Chairman Robert E. Allen for moving aggressively to stem the slide and transform the company.
Under Allen, AT&T; has divided its operations into decentralized, semi-autonomous business units, reached outside its bureaucracy for high-level managers with a fresh vision and aggressively pursued new opportunities such as its successful credit card business.
“AT&T;, unlike IBM, never made the mistake of thinking that because it was the market leader, the market would automatically follow it,” said Craig Ellis of Wheat First Securities in Richmond, Va. “AT&T; realized that it had to adjust to the changing market.”
But Ellis warned that A&T; still faces substantial challenges, particularly in its all-important long-distance telephone operations, which generate an estimated 70% of the company’s total revenue.
According to analysts, AT&T;’s long-distance business is growing more slowly than the industry as a whole, increasing just 5% compared to an estimated 6% to 7% for the industry.
At the same time, analysts note that AT&T;’s share of the long-distance market has again declined, slipping to about 66% in 1992 and giving up about two percentage points to archrival MCI.
Revenue for the fourth quarter was $17.5 billion, 6% above the $16.5 billion posted in 1991. For the full year, revenue was $64.9 billion, 3% higher than the 1991 total of $63.1 billion.
AT&T; vs. IBM
A comparison of profits and losses at AT&T; and IBM since 1987 shows diverging bottom lines (in billions) AT&T;: $3.81 IBM: --$4.96
Sources : AT&T;, IBM
