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AT&T beats 2Q forecasts
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July 25, 2000: 3:57 p.m. ET
Wireless and cable gains counteract drop in consumer long-distance division
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NEW YORK (CNNfn) - AT&T Corp. beat second-quarter earnings forecasts Tuesday, overcoming a weak consumer long-distance business with growth in its wireless and cable television operations.
Executives at AT&T, which issued a tracking stock for its wireless operations during the quarter, also bumped up their third-quarter earnings forecast for the company.
Analysts, however, pointed out that the telecom and cable company's transformation from its historical role as primarily a long-distance carrier to an Internet-era company providing high-speed data, wireless and cable television services continues to weigh on its core business.
Before the New York market's opened Tuesday, AT&T posted second-quarter earnings, excluding special items, of $1.9 billion, or 57 cents per share, for the second quarter.
That beat the 53 cents per share analysts polled by First Call had forecast the company would earn, and it's up from the $1.6 billion, or 49 cents per share the company posted during last year's second quarter.
Total Revenue rose to $16.2 billion from $15.8 billion a year earlier.
Wireless revenue was up 32 percent to $2.5 billion, while broadband revenue -- which includes cable television -- rose to $1 billion, up 10.5 percent when adjusted as if the recently acquired cable system MediaOne was a part of the company last year.
At the same time, revenue from consumer long-distance service fell 7.2 percent to $5 billion. Long-distance service to business customers, however, rose 4 percent to $7.1 billion.
AT&T said growth in its business-customer sector will be about 7 percent in the second half, lower than the 8 percent growth the company had forecast earlier in the year.
A mixed bag
While AT&T executives said the business-customer division is back on track for growth, they pointed out that the company's shifting strategic focus continues to put limits on growth.
"What you're going to see is a gradual increase," said Rick Roschitt, president of AT&T Business Services. "It [business services] is a $30 billion a year enterprise. You don't step on the accelerator and see things happen over night."
Executives insisted they are on track to weigh AT&T's business more on high-growth areas such as wireless and broadband communication. Analysts said Tuesday that while the company is making progress, the latest results show that the change is coming slowly.
"They're doing a good job moving toward the higher-growth businesses in terms of wireless and high-speed access, and they've shown a very respectable outcome," said Bruce Roberts, an analyst at Dresdner Kleinwort Benson in New York.
 "But the core businesses are still suffering," Roberts added. "It's a mixed bag."
"This is a very difficult task they're taken on, and I don't think you can expect them to turn the ship around too quickly," Vince Farrell, chairman and chief investment officer of Spears, Benzak, Salomon and Farrell, told CNNfn's Ahead of the Curve program Tuesday. (207KB WAV) (207KB AIFF)
Investors showed little concern for the declines in AT&T's (T: Research, Estimates) core business. Shares rose 1-13/16 to 35-1/8, a 5.4 percent gain on the day.
The gains may have been driven by the performance of the AT&T Wireless Group (AWE: Research, Estimates), according to Kleinwort Benson's Roberts.
"I was especially impressed by the wireless numbers," he said.
 In addition to the 32 percent rise in revenue, AT&T Wireless earned $22 million, or 6 cents per share. Those figures include results only since April 27, when the company was created through an initial public offering of a new stock tracking the performance of AT&T's wireless business.
The average monthly revenue per subscriber was $71.50, up 7.7 percent from the $66.40 reported for the second quarter of 1999.
AT&T Wireless shares rose 1-13/16 to 28-7/8, a 6.7 percent gain.
A strong third quarter on tap; no guidance for 2001
Looking ahead, Charles Noski, AT&T's chief financial officer, told CNNfn's Ahead of the Curve program Tuesday that the company's earnings for 2000 should be in the $1.75 to $1.80 per share range. That would put the company's annual profit near the $1.77 per share forecast by First Call, but down sharply from the $2.22 per share it posted in 1999.
 Noski added that AT&T is on track to earn 40 to 43 cents per share in the third quarter, which is above current forecasts of 37 cents a share.
However, Noski and other AT&T executives declined to provide financial guidance for 2001, even when pressed to do so during a conference call with analysts later in the morning.
They said that was the best way to help avoid future disappointments. The company was stung when it reported its first-quarter results and reduced its 2000 revenue and earnings forecast.
"I agree getting a view of the future will be important to a value of the stock," Noski said. "We promised we'd do a very diligent job of planning going into next year. We want to finish our planning work and make sure we've done it right before we give any kind of guidance."
For the first six months of this year, AT&T's net income, including special items, was $3.5 billion, or $1.07 a share, up from $2.7 billion, or 88 cents a share, in the year-earlier period. Revenue climbed to $32.1 billion from $29.9 billion. 
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AT&T
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