AT&T; Stock Falls 14% After Profit Report
AT&T; Corp. shares plunged more than 14% Tuesday after the long-distance giant surprised investors with financial results and projections that fell short of expectations.
The steep drop, the largest-percentage one-day fall for AT&T; in 13 years, came as the phone company announced job cuts expected to total 6,200 by 2001 and lackluster first-quarter profit, and warned of lower revenue and profit for the full year.
Investors pummeled the company’s stock, sending the shares down $7.06, to $41.94, making it one of the most actively traded issues on the New York Stock Exchange on Tuesday.
Some analysts were particularly irritated that the company waited to deliver its bad news until after last week’s initial public offering of so-called tracking shares in AT&T;’s wireless business, which raised a record $10.6 billion and served as one of the few bright spots for the company of late.
“A market surprise of this size means that investors were not given accurate guidance in the past,” said Scott Cleland, a telecommunications analyst at Legg Mason’s Precursor Group. “They got everybody focused on one part [wireless], and didn’t tell them about the other parts--and they are inextricably linked.”
Traders got much better news from emerging rival phone company Global Crossing Ltd., which released first-quarter results after the market closed and beat analyst expectations.
On Tuesday, though, much of the focus was on AT&T.;
Global Crossing released its results after the markets closed. Its shares fell $2.19, to $32.63 in regular Nasdaq trading, and lost another 75 cents, to $31.88, in after-hours trading.
The New York-based company reported lower operating profit of $1.73 billion, or 53 cents a share, compared to $1.72 billion, or 61 cents per share, in the same year-earlier period.
Revenue from continuing operations grew 5.8%, to $15.8 billion, up from about $15 billion a year earlier.
The wireless business, which trades as a separate stock but remains under AT&T;’s control, reported first-quarter sales of $2.2 billion, up nearly 41%. AT&T; wireless subscribership grew more than 30% to 13.1 million customers, including numbers from partnerships.
What surprised analysts the most, however, was AT&T;’s report that year-end profit would not meet expectations, and likely would total about $1.87 per share, instead of the expected $1.92 per share. The company said it now expects sales growth of 7% to 8% instead of the original forecast of 8% to 9% growth for this year.
AT&T;’s slower overall revenue growth means that AT&T;’s fast-growing wireless and data management businesses may not be enough to offset the accelerating drop in revenue from the firm’s long-distance business.
In addition, AT&T; said it has signed up just 39,500 customers for its broadband telephony service at the end of April--a figure that remains well shy of the company’s goal of having 400,000 to 500,000 customers by year’s end.
Those figures will improve somewhat once AT&T; completes its purchase of cable company MediaOne, which is expected to close mid-year.
“The rubber’s hitting the road right now, and people want to know when AT&T; will deliver the results,” said Brian Adamik of the research firm Yankee Group.
At Global Crossing, however, the news was more upbeat.
The Bermuda-based company, which has executive offices in Beverly Hills, reported a first-quarter loss of $279.4 million, or 36 cents per share. Analysts had expected a loss of 43 cents a share, according to First Call/Thomson Financial.
Global Crossing’s first-quarter loss was 39 cents a share, according to the company.
Shareholders in the 3-year-old company likely will applaud the firm’s apparent plan to sell off the local phone business it absorbed as part of its purchase of long-distance carrier Frontier Communications.
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Static Performance
AT&T;’s shares tumbled Tuesday after the company’s earnings warning, extending the basically static performance of the stock since early 1999. Monthly closes and latest on the NYSE:
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Tuesday: $41.94, down $7.06
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Source: Bloomberg News
