AT&T Corp. said first-quarter profit dropped 24 percent and warned that second-quarter earnings will fall further as it spends more to enter markets and fight rivals in its long-distance and wireless businesses.
Profit from continuing operations fell to $1.12 billion, or 69 cents a share, from $1.47 billion, or 92 cents, in the year-earlier period. That’s a penny short of the average estimate of 70 cents from 18 analysts surveyed by I/B/E/S International Inc.
The lower-than-expected results show that AT&T’s split into three companies has yet to be the promised boon to shareholders.
Shares are down 20 percent since Dec. 31, when AT&T completed the spinoff of its computer and equipment businesses. The stock fell 62 cents, to $33, in late trading.
“The split has clearly exposed where AT&T is most vulnerable,” said Brian Adamik, an analyst at the Yankee Group. AT&T’s sales rose just 1.5 percent–the slowest pace in at least two years–to $13.05 billion from $12.85 billion. AT&T didn’t break out sales for its long-distance and wireless businesses before 1995.
Sales in AT&T’s consumer long-distance business fell 1 percent, to $6.06 billion, while calling volume, or the minutes of use on AT&T’s network, was unchanged from a year earlier.
Sprint Corp., the No. 3 U.S. long-distance phone company, had a 7.3 percent jump in first-quarter sales.
AT&T is fighting Sprint, No. 2 MCI Communications Corp., and smaller rivals that have made inroads in the residential market.
