MCI WorldCom Says Its Profit Tripled
MCI WorldCom Inc., which is acquiring rival Sprint Corp. in what would be the largest-ever corporate takeover, said Thursday that its profit more than tripled in its third quarter as demand for data services surged.
The long-distance company said net income rose to $1.1 billion, or 55 cents a share, from $359 million, or 19 cents, a year ago. Analysts were expecting earnings of 54 cents this quarter, the average forecast of 25 analysts surveyed by First Call Corp.
The earnings news pushed MCI WorldCom’s shares up $6.06 to close at $83.63 in heavy Nasdaq trading.
MCI WorldCom Chief Executive Bernard Ebbers, who has acquired more than 60 companies this decade, is focusing on cost control and fast-growing services such as data, Internet and international operations.
The company is benefiting from higher-than-expected savings from its purchase of MCI Communications Corp. last year. The year-earlier results are stated as if WorldCom’s purchase of MCI had already taken place.
Revenue rose 11% to $8.52 billion from $7.67 billion. That was faster than rival AT&T; Corp.’s 5.6% revenue gain and the 7.4% revenue jump at Sprint.
“The scope of their network is giving them a lot of advantage in signing up business customers for voice, data and everything else,” said Mel Marten, an analyst at Edward Jones & Co., who has a “strong buy” rating on the stock.
MCI WorldCom signed up 2.5 million customers for its 5-cent-a-minute long-distance plan, Ebbers said on a conference call. About 75% of the subscribers are first-time customers. The rate at which customers are leaving the company is the lowest since 1996, Ebbers said.
The company cut its long-distance rates in August after Sprint slashed its prices by 50%.
MCI WorldCom’s early investments in the Internet, as well as local and international markets, are helping it outpace sales gains at rivals AT&T; and Sprint. More than 75% of MCI WorldCom’s incremental communications services revenue this quarter came from fast-growing nontraditional services, including data, Internet and international. These now account for almost 40% of total sales, MCI WorldCom said.
Domestic local phone service revenue climbed 80% and now accounts for about 4% of voice revenue, the company said.
U.S. data revenue rose 28% to $1.94 billion, and Internet revenue jumped 57% to $924 million.
Earlier this month, MCI WorldCom agreed to buy Sprint for $129 billion. The new company, to be called WorldCom, would control about 30% of the U.S. long-distance market.
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At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
* Insurer American International Group Inc. posted a 16% rise in profit from operations in its third quarter to $1.23 billion, or 79 cents a share, buoyed by life insurance and money management businesses acquired earlier in the year. Revenue gained 7% to $9.64 billion. Gains in life insurance and money management offset slower growth in property and casualty insurance.
* AutoNation Inc., the nation’s largest auto retailer, said its profit from continuing operations rose 14% in its third quarter to $92.6 million, or 22 cents a share, matching estimates, as sales climbed 56% to $5.46 billion. AutoNation said its new-auto sales rose 68% to $3.21 billion, as sales at stores open at least a year grew 21%. Used-car revenue rose 34%, but same-store sales slipped 0.5% to $813.1 million.
* Kellogg Co. said its third-quarter profit rose 20% to $170.8 million, or 42 cents a share, a penny higher than estimates, as revenue rose 3.5% to $1.87 billion.
* Procter & Gamble Co. said its profit rose 8.5% in its fiscal first quarter to $1.27 billion, or 88 cents a share, matching estimates, as new products and a rebound in Asia boosted sales.
