Sprint’s Profit Soars on Sale of Directories Unit

Sprint Corp., the third-largest long-distance telephone company, said first-quarter net income rose to $1.67 billion on a gain from the sale of its directories business.

But shares of the company’s main units fell after Sprint reduced 2003 forecasts.

Net income rose from $140 million a year earlier. The directory sale added $1.31 billion to earnings. Total sales fell 4.5% to $6.34 billion from $6.64 billion.

Sprint is relying on expense reductions to generate profit amid declining sales at its main phone business and slowing wireless revenue.

New Chief Executive Gary Forsee has less room to slash costs than predecessor William Esrey, who eliminated about 15,000 jobs in the last two years, analysts say.

Cost cutting “is not going to be the same as it has been for the past year or two,” Kurt Funderburg, an analyst at Harris Associates, said before the results were released. Harris Associates is Sprint’s 10th-largest stockholder, with 18.4 million shares in December.

“At some point, they can’t shrink their expense base continually as a way to rejuvenate their earnings,” Funderburg said.

The company lowered its forecast for 2003 per-share profit at the local and long-distance phone unit by 10 cents to $1.30 to $1.35. It also expects a sales decline of as much as 7%. That compares with a previous sales estimate of a low-single-digit-rate decline.

Sprint PCS’ 2003 loss-forecast range widened by 5 cents to 45 to 50 cents a share. It still expects to have net customer additions of about 6 million. The unit will have 2003 capital spending of $2.1 billion, down from a forecast of up to $2.4 billion.

Shares of Kansas City, Mo.-based Sprint’s main phone unit fell to $10.86 in after-hours trading after rising 22 cents to $11.27 on the New York Stock Exchange.Shares that track the performance of the company’s PCS wireless unit, the nation’s fourth-largest mobile phone operator, fell as low as $4 after slipping 2 cents to $4.46 on the NYSE.

Sprint’s long-distance and local-phone unit, known as FON Group, had net income of $1.86 billion, or $2.06 a share, compared with $286 million, or 32 cents, a year earlier. Sales fell to $3.58 billion from $3.90 billion, the ninth drop in a row.

The unit had a gain of $1.46 a share in the latest quarter from the directory sale.

Sprint PCS, the first major U.S. wireless operator to report first-quarter results, had a net loss of $182 million, or 18 cents a share, compared with a loss of $146 million, or 15 cents, a year earlier.

Sales rose 3.5% to $2.95 billion from $2.85 billion. PCS revenue rose 11% in the fourth quarter.