|
AT&T cuts dividend; warns
|
 |
December 20, 2000: 6:13 p.m. ET
Board slashes dividend to lower costs during restructuring
|
NEW YORK (CNNfn) - AT&T Corp., whose stock is one of the most widely held in America, on Wednesday slashed its dividend by 83 percent, and also warned that fourth-quarter earnings and revenue will miss estimates due to weakness in the long-distance sector.
| |
 WHY CUT DIVIDEND?
|
|
| |
|
AT&T, under pressure from credit-rating agencies to pare its $62 billion of debt and $3 billion per year of interest costs, is looking for ways to conserve cash.
|
|
|
Facing a lagging stock price and struggling long-distance business, AT&T, which traces its roots back to telephone inventor Alexander Graham Bell, announced after the bell Wednesday a new quarterly payout of 3-3/4 cents a share, down from its current 22 cents, or 88 cents per share for the year.
It will be the first reduction in the payout to shareholders in its more-than-100-year history.
AT&T (T: Research, Estimates), in the midst of a major restructuring that will turn its four main business units -- consumer services, business services, wireless, and cable -- into separately traded companies, warned in October that it would trim the dividend in the fourth quarter.
The move was seen as a way to cut costs during the major restructuring.
"While we did not make this decision lightly, we believe it is necessary and in the best long-term interests of our shareowners to adopt a dividend policy comparable to the policies of our competitors," said AT&T Chairman C. Michael Armstrong.
 It noted that the new companies would have different dividend policies. For example, AT&T Consumer is expected to allocate a greater portion of its earnings to dividends, while neither AT&T Wireless nor AT&T Broadband are seen paying a dividend in the foreseeable future.
Under pressure from credit-rating agencies to pare its $62 billion of debt and $3 billion per year of interest costs, AT&T is looking for ways to conserve cash. The current dividend costs AT&T about $3.3 billion a year.
Analysts say investors will likely tolerate a lower dividend only as long as the company is seeing solid earnings growth. "But until AT&T articulates its growth strategy, the stock could be vulnerable," Bruce Roberts of Dresdner Kleinwort Benson told Moneyline. (217K WAV) or (217K AIFF)
Revenue growth, profit outlook also cut
The company also announced that fourth-quarter operating earnings per share will now fall in the range of 26 cents to 28 cents, compared with its previous projection of 29 cents to 33 cents and analysts estimates for a profit of 31 cents per share.
The New York-based company said it expects overall revenue to grow 2.5 to 3 percent in the fourth quarter, compared with previous guidance of 4 to 5 percent, due to industry-wide factors affecting its long-distance businesses. Changes in the anticipated signing of certain large network-management contracts by its solutions unit also hurt results in the quarter.
AT&T added that fourth-quarter revenue for its Consumer Services division is expected to decline at a mid-teens rate, compared to the nearly 11 percent decline previously projected. It attributed the growth slump to slower-than-expected industry growth.
Fourth quarter 2000 performance in consumer and business services will likely affect some of company's outlook measures for those businesses in 2001, as well.
Shares of AT&T stock sank $1.62 to close at $18.94 Wednesday. In after-hours trade, AT&T shares traded at $17.63. 
|
|
|
|
|
|
AT&T
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
