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SBC beats forecast, warns
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January 24, 2002: 1:55 p.m. ET
Telecom service provider tops 4Q estimates, but sees negative 1Q factors.
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NEW YORK (CNN/Money) - SBC Communications reported higher fourth-quarter earnings Thursday that topped analysts' estimates, but said first-quarter earnings will be lower than forecast.
The regional phone service provider earned $2.2 billion, or 64 cents a share, up from $2 billion, or 57 cents a share, a year earlier. The results topped forecasts of 62 cents a share, according to analysts surveyed by First Call.
Revenue for the quarter was unchanged at $14.05 billion and the company said revenue comparison with the year-ago period were impacted by economic weakness, regulatory uncertainty and local phone market competition.
Shares of SBC (SBC: up $0.43 to $36.76, Research, Estimates) edged up just over 1 percent in midday trading.
"I think when you look at what the company delivered for the fourth quarter, what you saw was significantly worse momentum in the core business than I think people were expecting," said Sanford Bernstein analyst Jeff Halpern. "It was not a high quality earnings quarter."
SBC and other traditional telephone companies have been investing in services such as data, Internet and wireless to fuel future growth. But SBC still gets more of its profits from local telephone service, where sales of telephone access lines have softened.
"The trends are not encouraging on the core wireline business," said Jefferies & Co. analyst Richard Klugman.
San Antonio-based SBC said it added 146,000 high-speed Internet digital subscriber lines, bringing its DSL total to 1.3 million.
First quarter expectations lowered
SBC also said earnings for the first quarter of 2002 would be between 49 cents and 51 cents a share. That's below the 56 cent per share First Call consensus. SBC said pension expenses and economic weakness would hurt results for the quarter.
For full-year 2002, SBC said it sees "significant expansions in its growth platforms" with anticipated approval to provide long-distance service in California and wireless service through its Cingular joint-venture with Bell South Corp. (BLS: up $0.43 to $39.06, Research, Estimates) in New York City.
"2002 has a disappointing outlook -- a darker outlook than I thought," said Patrick Comack, an analyst with Guzman & Co.
SBC said it would cut its 2002 capital spending to $9.2 billion to $9.7 billion, down from $11.2 billion in 2001. In October, SBC had said it would cut capital spending budget to about $9.6 billion by scaling back an Internet project.
"Though we are trimming capital expenditures in 2002, we will continue to invest capital in the right places, namely our major growth drivers," SBC Chairman Edward Whitacre said. "It is critical that SBC continue to provide excellent customer service and invest smartly to grow our data, long-distance and wireless revenues." 
-- from staff and wire reports
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