AT&T posts 4 cents per share profit for Q3

AT&T generated a third-quarter 2001 profit of 4 cents per diluted share from continuing operations, on revenues of about $13.1 billion. The performance was in line with the company’s guidance of 2 cents to 5 cents per share and equaled the consensus estimate of analysts polled by Thomson/First Call.

However, the results were well below the 35 cents per diluted share recorded for the same quarter last year.

Revenues for the quarter were down 7.7% compared to the same period a year ago. The company attributed this to a “continued decline in long-distance voice services compounded by a softening economy.”

In an analyst conference call, AT&T Chairman and CEO C. Michael Armstrong said the tragedies of Sept. 11 “layered on an already weak economy” are having a negative impact on the company’s business, specifically in data services and local revenues, which have been affected by the heavy damage sustained by the company’s network facilities in New York City. However, the company has experienced improved demand for secure data-storage services and a 20% increase in demand for teleconferencing services since Sept. 11.

All in all, Armstrong was pleased with the quarter.

“We achieved our performance targets in a highly challenging economic environment,” he said. “We made good progress on debt reduction and cost competitiveness. We’re on a path to resolving our situation with @Home. We have a stronger management team in place. And we’ve put Concert behind us.”

Regarding Concert, Armstrong said AT&T was “focused on serving our global customers effectively in a way that protects their investment.” Specifically, he said the company’s multinational customers should expect a “common platform” that extends to products, services and contracts.

The company announced that it would reduce capital expenditures (CAPEX) in its core business and consumer units by 20% or more in 2002 as part of its focus on reducing costs. According to David Dorman, AT&T president, AT&T believes it can support lower CAPEX rates by optimizing the company’s existing capacity.

Examples would include the “largely completed next-generation IP and optical backbone networks, metro fiber where we operate AT&T local networks and our 18 Internet data centers,” he said.

Dorman said the economic slowdown and the events of Sept. 11 are impacting customers, who are focusing on “maximizing the utilization of existing networks” rather than migrating to new technologies. As a result, AT&T has seen traffic on its frame-relay network increase 50% year over year, while traffic on its asynchronous transfer mode and Internet Protocol networks increased 100% and 200% respectively over the same period.

“Customers are … carefully scrutinizing expenditures to drive cost efficiencies of existing networks,” he said.

Since Sept. 11, AT&T has seen an “unprecedented drop-off” in monthly call-volume growth, which is driving “flat” performance in the company’s long-distance business, Dorman said. Customers in the travel, retail, technology and financial sectors have been most affected.

“We have clearly felt the impact of business disruption in the quarter, in both voice and data,” he said.

He added that the company has limited visibility for the future because “it is difficult to separate the Sept. 11 tragedy from recurring trends.” However, Dorman said AT&T is particularly concerned about the decline it has experienced in demand from retailers in preparation for the holiday shopping season, the “most important time of the year” for the company’s toll-free business.