Harsh Competition Cuts AT&T Profits by 11%

THE JOURNAL RECORD, October 18, 1996 | Go to article overview

Harsh Competition Cuts AT&T Profits by 11%


NEW YORK (AP) -- AT&T Corp., stung by harsh competition for long- distance phone customers as well as credit-card losses, on Thursday reported an 11 percent drop in third quarter profits.

Investors' reaction to the results was muted, since AT&T warned a month ago to expect the weaker profits. AT&T stock was unchanged at $39.87 1/2 per share in trading on the New York Stock Exchange.

But the results gave a close look at the bruises on the nation's largest telephone company from its heated battle for customers with MCI, Sprint and a host of smaller providers of long-distance service. AT&T said in the three months ended Sept. 30 it earned $1.36 billion, or 84 cents a share, from continuing operations, reflecting its spinoff of Lucent Technologies, its high-technology equipment business, and other parts of its previously announced breakup. That was down from profits of $1.53 billion, or 96 cents a share in the third quarter of 1995. Results last year also were adjusted to eliminate results from Lucent and other units for purposes of comparison. Revenues grew 2 percent to $13.23 billion from a restated $12.92 billion. The results were in line with a warning last month from the company that its earnings would be about 10 percent below market expectations of about 92 cents per share. AT&T's results contrasted with those at archrival Sprint Corp., which on Tuesday reported a 16 percent profit increase chiefly due to a flat-rate calling plan. The plan, which drew customers from AT&T, resulted in a 21-percent increase in call volume at Sprint during the quarter -- far higher than the 5 percent increase at AT&T. AT&T last month began fighting back with its own pricing plan that also charged customers a flat rate for long-distance, direct-dialed phone calls anywhere in the United States. In a conference call Thursday, chief financial officer Rick Miller said that the company was "encouraged by initial results" even though the new marketing program was just three weeks old. The battle comes as AT&T undergoes a dramatic spinoff that refocuses its attention on its long-distance and other core phone businesses. In addition to the Lucent separation, AT&T is preparing to spin off its computer manufacturing arm, NCR Corp., selling other units and seeking a buyer for its underwater phone-cable business. The uncertainty has been heightened by AT&T's search for a new president and likely successor to chairman Robert E. …

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Harsh Competition Cuts AT&T Profits by 11%
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