SBC Posts Lower Results
SBC Communications Inc., the nation’s No. 2 local phone company, reported lower fourth-quarter sales and profit Thursday, and said it would cut thousands more jobs to reduce costs amid lower sales expectations for 2002.
The company, which owns San Francisco-based SBC Pacific Bell, said its results reflect the ongoing economic downturn, which has dampened demand for telephone lines and slowed the growth of other services.
SBC’s net income for the quarter that ended Dec. 31 totaled $1.2 billion, or 37 cents a share, compared with net profit of $1.3 billion, or 38 cents a share, for the fourth quarter of 2000.
Those results include more than $1 billion in special charges from a proposed merger-related settlement in Illinois, the reduced value of some international investments and costs related to employee layoffs, terminated leases and the closure of some operations.
Excluding the special items, SBC’s fourth-quarter profit rose slightly to $2.2 billion, or 64 cents a share, up from $2 billion, or 57 cents a share a year ago. Sales for the quarter fell 2.5% to $11.9 billion, down from $12.2 billion a year earlier.
For the full year, SBC booked net profit of $7.2 billion, or $2.13 a share, including extraordinary items, versus net income of $8 billion, or $2.32 a share.
Traders seemed to shake off the disappointing results, as SBC shares rose 7 cents to close Thursday at $36.40 on the New York Stock Exchange.
“When you look at what the company delivered for the fourth quarter, what you saw was significantly worse momentum in the core business than I think people were expecting,” said Jeff Halpern, an analyst at Sanford Bernstein.
Revenue from SBC’s core local phone units fell 3.2% in the fourth quarter, accelerating a decline that started in the second half of 2001. The company’s total number of phone and data lines fell almost 3% in the quarter, including a 4.7% drop in residential lines.
What set analysts on edge was SBC’s announcement that future results also would be lower than previously expected.
In the current quarter, which ends March 30, SBC expects to post net earnings of 49 cents a share to 51 cents a share, including special charges related to goodwill adjustments and other items.
The company said it expects earnings to improve later in the year, with total 2002 growth of between 5% and 7%, not counting special expenses.
Sales growth this year will be a mere 1% to 3%, according to SBC Chairman and Chief Executive Edward E. Whitacre Jr.
“The growth estimate is just ugly,” said Vik Grover, a telecommunications analyst with Kaufman Bros. “One percent to 3% is not very exciting.”
To keep up its profit margins, SBC said it has cut back capital spending, shuttered some facilities and in the fourth quarter reduced its payroll by 5,000 through layoffs and attrition. Executives said Thursday that the company plans “thousands” more job cuts this year.
*
Reuters was used in compiling this report.
