SBC Drops 13% After Firm Trims Sales, Profit Forecasts
SBC Communications Inc. shares fell 13% after the No. 2 U.S. local-telephone company and parent of Pacific Bell in California cut its forecasts for sales and profit in 2001, citing delays in adding and improving services.
The stock dropped $6.75 to close at $46.56 on the New York Stock Exchange. The shares of two other U.S. regional phone companies, Verizon Communications and BellSouth Corp., also declined.
SBC is having trouble winning regulatory approval to enter the long-distance phone market in several states, including California, and upgrade work in its Ameritech unit’s territory has delayed high-speed Internet service availability, SBC said.
BellSouth cut its 2001 profit forecast by half Nov. 16, citing costs for adding Internet-access customers and entering Colombia.
“One of the best things about telecommunications over the years has been its virtual impunity to economic conditions,” said Bern Fleming, money manager of the AXP Utilities Income Fund, which owns 2.2 million SBC shares. That may be changing, he said, “as we become more dependent on cellular.”
In 2001, SBC expects per-share earnings growth of 11% to 14%, driven by sales of wireless, long-distance, data, international and out-of-region services. The firm expects sales to rise 8% to 9% next year, spokesman Larry Solomon said.
Analysts on average had predicted the company would post an earnings-per-share rise of 14.5% and revenue growth of more than 10% in 2001, according to First Call/Thomson Financial.
Insufficient capacity and inadequate maintenance are causing Ameritech’s difficulties, SBC Chairman and Chief Executive Ed Whitacre said. SBC acquired Ameritech in October 1999 for $80.6 billion.
BellSouth, based in Atlanta, fell $2.63 to close at $41.25. New York-based Verizon dropped $3.94 to close at $51.88. Both trade on the NYSE.
SBC’s full-year 2001 earnings will be $2.25 to $2.27 a share, the company said. It’s expected to earn $2.27, the average estimate of analysts in a First Call/Thomson Financial poll.
SBC said it will earn 56 cents to 58 cents a share in the fourth quarter. It was expected to range from 54 cents to 60 cents. In the year-ago quarter, the company had profit from operations of $1.85 billion, or 54 cents a share.
