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SBC meets 1Q, warns
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April 23, 2001: 12:41 p.m. ET
Continuing economic weakness will impact telecom's full-year earnings
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NEW YORK (CNNfn) - SBC Communications Inc. reported first-quarter earnings Monday that met Wall Street analysts' lowered expectations, but warned the continuing economic slowdown will cause it to miss expectations for the full year.
SBC, a component of the Dow Jones industrial average, reported first-quarter earnings of $1.7 billion, or 51 cents a share, down from $1.9 billion, or 56 cents a share, in the year-earlier period.
Wall Street analysts expected the third-largest U.S. telecommunications company to earn 51 cents a share, according to earnings tracker First Call.
Analyst expectations were cut in March from 59 cents a share to 51 cents after the company said its acquisition of Sterling Commerce and the introduction of new services would hurt earnings.
The San Antonio-based company said it cut its outlook for full-year 2001 earnings per share to a range of $2.35 to $2.40, "primarily because of weakening economic conditions." Analysts polled by First Call expected the company to earn $2.47 a share in 2001.
"The economy is having a greater impact on our business than we projected," Chairman and CEO Edward E. Whitacre Jr. said.
SBC's revenue rose to $13.1 billion from $12.6 billion a year earlier, driven primarily by growth in data, wireless and long-distance services, the company said.
Difficult growth environment
Andrew Hamerling of BofA Montgomery wasn't surprised by SBC's numbers. "We were of the view that this was inevitable," Hamerling said.
Hamerling said SBC, like other local providers, is in a "rather tough spot" because efforts to grow revenue burn up capital and hurt their bottom line.
Hamerling did say, however, that he thinks SBC is a good company in a firm position. "There's a monopolistic environment now at the local level," he said, with SBC, BellSouth Corp. (BLS: down $0.40 to $40.01, Research, Estimates), Verizon Communications (VZ: down $1.76 to $51.30, Research, Estimates), and Qwest Communications International Inc. (Q: down $1.05 to $36.35, Research, Estimates) in the best position to take advantage.
"We think they're good companies, solid companies," Hamerling said of the local providers, "but we also want to be realistic and tempered in terms of growth opportunities."
SBC is one of the seven original "Baby Bells" created when AT&T Corp. (T: down $0.87 to $22.05, Research, Estimates) was split up by regulators in 1984 and trails only AT&T and Verizon in annual revenue among telecommunications firms.
SBC (SBC: down $0.19 to $39.81, Research, Estimates) shares have a 52-week range of $38.44 to $59. 
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