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Qwest posts 3Q loss
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October 31, 2001: 9:01 a.m. ET
Telecom service provider disappoints analysts, who expected a profit.
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NEW YORK (CNNmoney) - Qwest Communications Inc. posted a loss for its third quarter Wednesday, missing Wall Street forecasts for a small profit as the telecommunications provider struggled with waning demand among its wholesale customers amid the slowing economy.
For the quarter ended Sept. 30, Qwest (Q: Research, Estimates) reported a net loss of $138 million, or 8 cents a share, compared with a profit of $231 million, or 14 cents a share, a year earlier. Analysts on average anticipated a profit of 3 cents a share, according to earnings tracker First Call.
Third quarter revenue was flat at $4.8 billion.
Qwest's shares tumbled 90 cents to $16 Tuesday. The stock is down about 7 percent from its 52-week high.
Qwest's results came shortly after Alcatel, Europe's fourth-largest telephone equipment maker, said it plans to slash 10,000 jobs and posted a third-quarter loss.
The company said wholesale customers cut back on purchases of Qwest's high-speed infrastructure by about $200 million in the quarter as they trim capital spending budgets in the face of a slowing economy.
"Our results reflect the continuing impact of a slowing economy as well as a fundamental shift in the wholesale customer buying behavior for optical capacity asset sales," CEO Joseph Nacchio said.
However, the company posted a 4.5 percent increase in retail customer sales as demand for high-speed Digital Subscriber Line services remained strong. And wireless sales increased 68 percent in the period.
"We are continuing to focus on retail revenue growth and the generation of free cash flow from operations," Nacchio said. "Our blend of assets, products and expanding distribution channels positions us well for the economic recovery."
Consumer and small business revenue increased 3.4 percent from a year ago reflecting strong wireless and DSL subscriber growth. Wireless revenue increased 68 percent to more than $200 million.
DSL revenue grew 80 percent as the company logged 90 percent subscriber growth to about 405,000 customers.
Third-quarter Internet, data and IP service revenue, which represents 23 percent of the company's total sales, grew 20 percent from a year ago. The strongest growth came in Web hosting and related services and Internet professional services.
Qwest said it is continuing to focus on cost-saving initiatives beyond the previously announced 4,000 job cuts and shift of 1,000 employees to sales positions. Some of those initiatives include trimming vendor costs, and corporate structure and work flow processes.
The company did not provide fourth-quarter or future guidance based on expected cost-cutting.
During the quarter Qwest launched its Connected Home service, which provides consumers with always-on DSL Internet access along with a separate voice line.
Separately, Qwest said its board extended Nacchio's employment contract from Dec. 31 through Dec. 31, 2005, and granted him an additional 7.25 million stock options. Additionally, the company said it is providing additional equity incentives to 15 other senior executives in an effort to drive long-term shareholder value.
Qwest also announced a voluntary stock option exchange offer for about 24,000 full-time non-union employees as it moves toward a more incentive-based compensation. Eligible employees have the option to exchange current options priced at $35 or more for the same number of replacement options. 
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