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AT&T moves cheer Wall St.
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January 8, 1999: 2:54 p.m. ET
Forecast, plans push stock to 52-week high, but some analysts have doubts
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NEW YORK (CNNfn) - Telecommunications analysts were divided over whether or not some of the forecasts and business changes AT&T Corp. announced Friday will prove beneficial to investors in the long run.
But Wall Street expressed its confidence in the telecommunications giant, sending the company's shares up 3-1/8 to a 52-week-high of 85-3/8 in Friday afternoon trading.
The company said its 1999 earnings, excluding the impact of the planned merger with Tele-Communications Inc. (TCOMA), will be between $4.20 and $4.30 a share. That's slightly above the $4.09 consensus of analysts surveyed by First Call, a company that tracks such estimates.
The company said it expects 1999 revenue to rise by between 5 percent and 7 percent on a pro forma basis. That takes into account the planned mergers with TCI and Vanguard Cellular Services (VCELA), as well as the acquisition of IBM's (IBM) global network operations that was announced last month.
AT&T also said it will split its stock 3-for-2 and will repurchase up to $4 billion of its common shares. And it said that, in order to absorb its recent transactions, it won't proceed with a proposal to create a tracking stock of its consumer services.
The company also announced it has reached agreements with 5 TCI affiliates to offer customers advanced communications services. The new ventures will offer such things as multiple phone lines per household, conference calling, call-waiting, call-forwarding and individual messaging for family members.
"The acquisitions and investments we've made over the last year will transform AT&T from a company dominated by a single product line -- long-distance voice - into the leader in a new generation of advanced communications, information and video services," said company chairman Michael Armstrong.
"I think the thing that impressed me is (AT&T CEO Michael) Armstrong's strategic vision and the fact that he's got John Malone (TCI's chairman) to go along," said Morris Mark, an analyst with Mark Asset Management after a meeting with AT&T and TCI management. "There's a real commitment to build a new AT&T."
But Bruce Roberts, the senior telecom analyst for Dresdner Kleinwort Benson, expressed concern that AT&T is sacrificing its core long- distance service business to expand in other areas.
"I think AT&T should spend a little more time trying to figure out how not to lose net market share and try to slow the bleeding," said Roberts, referring to fierce competition with MCI (WCOM), Sprint (FON) and others. "(They should) try to rev up that side of the business without trying to bring in new services. That's still an issue for me as an investor."
AT&T said it expects to complete the TCI merger by the end of the first quarter, and has set a Feb. 17 meeting in Secaucus, N.J., for shareholders to vote on whether to approve the transaction.
AT&T said pilot cable telephony programs with the five TCI affiliates will begin later this year, with full-scale commercial availability due in 2000. Market trials are scheduled this year in the San Francisco Bay area, Chicago, Dallas, Pittsburgh, Seattle, Denver, Salt Lake City, St. Louis and Portland, Ore.
"These joint ventures bring us another step closer to our goal of giving U.S. consumers a choice in local phone service," Armstrong said.
AT&T said it expects to own between 51 percent and 65 percent of the five affiliates: Bresnan Communications, Falcon Cable TV, Insight Communications, InterMedia Partners and Peak Cablevision. The company said it will have exclusive rights to offer communications services over the systems in return for payments to be made when the systems reach certain performance milestones.
The announcements came amid reports that AT&T has discussed buying the Microsoft Network and perhaps additional Microsoft media properties.
Microsoft (MSFT) chief executive officer Bill Gates hosted a dinner attended by AT&T's Armstrong and president John Zeglis last fall, USA Today reported Friday.
AT&T apparently decided not to buy the properties for now, but Microsoft reportedly considers the talks to be ongoing. The discussions are said to have included AT&T absorbing the Microsoft Internet service provider (ISP) into AT&T WorldNet. 
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