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AT&T readies job cuts
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October 23, 2001: 3:11 p.m. ET
Nation's No. 1 long-distance provider to post 3Q results later Tuesday.
By Staff Writer Luisa Beltran
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NEW YORK (CNNmoney) - AT&T Corp., the nation's top long-distance phone provider, may provide some signs of recovery for the beleaguered telecommunication sector when it posts results later Tuesday, analysts said.
New York-based AT&T confirmed Tuesday it will cut 2,400 jobs. The news comes as the telecom titan is expected to report a third-quarter profit of 4 cents after the market closes Tuesday, down from the 38 cents it posted during the same period last year.
Observers hope AT&T will provide some guidance as to the status of its broadband unit, which it is trying to sell, and its plans for the remaining businesses, analyst Douglas Christopher of Crowell Weedon said.
"AT&T bought a lot of problems on themselves with acquisitions," Christopher said. "Hopefully, we'll see cleaner results today or at least some progress to cleaner results."
AT&T Wireless Services Inc. posted solid third-quarter results Tuesday, when it reported a profit of 3 cents per share on revenue of $3.5 billion. Redmond, Wash.-based AT&T Wireless (AWE: up $0.97 to $13.91, Research, Estimates) went public in 2000 and was spun out from parent AT&T Corp. earlier this year.
But all eyes will be on the performance of AT&T Broadband, which could show improvement, analysts said. The cable segment is seen posting a 14 percent growth in revenue, similar to last quarter's results.
On Tuesday, AT&T ousted Dan Somers as head of the broadband unit, replacing him with William Schleyer. Somers is retiring, AT&T said.
Somers' successor could give AT&T ammunition to launch a tracking stock for the cable business, analyst Pat Comack of Guzman & Co. said. AT&T has been in talks to sell its cable business with various suitors, most notably Comcast Corp.
AT&T in July rejected Comcast's unsolicited $44.5 billion bid for the broadband business. Since then AT&T has pitched the cable business to other suitors, including AOL Time Warner (AOL: up $1.27 to $32.92, Research, Estimates), parent of CNNmoney.com.
"If the margins are not improved [at AT&T Broadband] then there is more justification for Comcast to say they can run the business better," Comack said.
Outside the broadband unit, hopes are dim for AT&T's other business segments, which will likely turn in worse-than-expected results, analyst Drake Johnstone of Davenport & Co. said.
AT&T Consumer probably will fall 20 percent, while AT&T Business will be down 2 percent, year to year, he said. "AT&T has been performing poorly all along and in a slowing economy we can expect that trend to continue," Johnstone said.
The whole telecom sector has suffered along with the broad market downturn. But pressure on the sector seems greater with the recent economic dip, Johnstone said.
"The telecom sector has significant exposure to the economy," analyst Jeff Halpern of Sanford Bernstein added.
Shares of AT&T (T: down $0.48 to $17.82, Research, Estimates) have dropped nearly 60 percent from their 52-week high of $28.62, while Sprint Corp. (FON: down $0.92 to $19.13, Research, Estimates) has fallen nearly 33 percent from its year high of $29.31. Last week, Sprint said it is scrapping a costly high-speed network project and cutting 6,000 jobs, or 7 percent of its staff.
Once-mighty WorldCom Inc. (WCOM: down $0.31 to $12.68, Research, Estimates) also has shed 55 percent in the past year and is trading at around $13.
BabyBells take a hit
Regional telephone companies, the Baby Bells, once were seen as a safe haven for investors, but that perception has changed. SBC Communications Inc. posted dismal results Monday when it announced plans to cut thousands of jobs, pare capital spending, and back off the development of high-speed Internet access infrastructure projects, an area the company has identified as a key growth opportunity.
"SBC sounded like they were throwing in the towel," analyst Drake Johnstone of Davenport & Co. said. "They were pretty downbeat."
SBC (SBC: down $2.50 to $38.90, Research, Estimates), the nation's No. 2 local telephone company, said it expects the economic downturn to persist throughout 2002, further dampening business and consumer demand.
Last week, Atlanta-based BellSouth Corp. fell short of Wall Street expectations when it reported third-quarter earnings of $1.7 billion, or 56 cents a share, before special items, 2 cents below analysts' expectations of 56 cents a share.
SBC and BellSouth Corp. each trace their founding to the formation of the seven original Baby Bells created when AT&T Corp. was split up by regulators in 1984.
But BellSouth (BLS: down $0.66 to $36.81, Research, Estimates) still is better positioned than SBC, Johnstone said. "Even though BellSouth's revenue growth slowed, their Internet data group actually accelerated," he said. "They still have positive aspects to their earnings."
Shares for SBC fell a further 6 percent Tuesday in early afternoon trading while BellSouth dropped nearly 3 percent.
Lucent et al.
The hard times continue to rain on Lucent Technologies Inc. Tuesday. Lucent posted a fiscal fourth-quarter loss that was larger than Wall Street expected on weaker-than-forecast revenue. The beleaguered telecom equipment maker said it lost $909 million, or 27 cents a share, in the quarter ended Sept. 30.
However, Lucent's net loss net loss for the quarter was $8.8 billion, or $2.59 a share, accounting for restructuring charges and a loss from discontinued operations.
Lucent (LU: down $0.22 to $6.68, Research, Estimates) said it is on track to cut its work force to between 57,000 and 62,000 employees by the end of March, in line with previous estimates of 55,000 to 60,000.
Agere Systems Inc., the former microelectronics unit of Lucent, turned in lower fiscal fourth-quarter losses than expected. Agere posted a loss of $393 million, or 24 cents a share, before one-time items, while Wall Street expected a loss of 31 cents a share.
"Agere beat the street because they did more cost-cutting than we thought," Guzman's Comack said. "But their revenue was down 35 percent sequentially from the prior quarter."
Agere's (AGR.A: down $0.06 to $4.99, Research, Estimates) optical revenue also dropped 53 percent from third quarter.
"This is a major disappointment," Comack said.
Shares of Lucent plummeted more than 4 percent Tuesday in afternoon trading while Agere dropped nearly 3 percent. 
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