Sprint Consolidated Earnings Drop 2.6%

Sprint Corp. said fourth-quarter earnings fell 2.6% to $38 million. The report on Tuesday came a day before Sprint was expected to announce a deal to outsource at least 5,000 jobs to IBM Corp.

The latest results compared with a year-earlier combined profit of $39 million for the wireline and wireless units.

Combined revenue rose 2.1% to $6.68 billion.

The outsourcing deal, expected to be announced today, would transfer about 8% of Sprint’s workforce, 5,000 to 6,000 jobs, to the payroll of IBM, analysts briefed by the companies said. The deal also calls for IBM to sell Sprint services to IBM’s customers, analysts said.

Most of the jobs are expected to come from the customer service operations of the cellphone business, Sprint PCS.

Sprint and IBM declined to comment on the outsourcing plan.

Industry analyst Jeff Kagan said the agreement, expected to save Sprint $2 billion to $3 billion over several years, also should help the company improve customer service.

“IBM has a fantastic reputation for handling customer care,” Kagan said, noting that a similar deal announced in 2002 between IBM and Nextel Communications Inc. has helped that cellphone company “become one of the customer care leaders in the industry.”

In the earnings report, Sprint said its wireline division, known as Sprint FON, earned $360 million, or 40 cents a share, in the fourth quarter, up from $294 million, or 33 cents, a year earlier. Revenue fell to $3.54 billion from $3.67 billion.

Excluding one-time items, Sprint FON earned 39 cents a share, slightly better than the 37 cents expected among analysts surveyed by Thomson First Call.

Sprint PCS’ fourth-quarter loss widened to $322 million, or 31 cents a share, from a loss of $255 million, or 25 cents, a year earlier. Revenue was $3.31 billion, up from $3.05 billion.

Excluding one-time items, PCS lost 10 cents a share, beating the consensus forecast for a loss of 12 cents.

For all of 2003, Sprint earned a combined $1.22 billion, compared with earnings of $630 million in 2002. Revenue rose to $26.2 billion from $26.68 billion.

Shares of Sprint FON were down 5 cents at $17.95 on the New York Stock Exchange. Shares of Sprint PCS fell 11 cents to $8.13.