washingtonpost.com  > Business > Personal Finance > Earnings

AT&T Reports $7 Billion Loss

Retreat From Traditional Phone Service Causes Drop

By Bruce Meyerson
Associated Press
Friday, October 22, 2004; Page E03

NEW YORK, Oct. 21 -- AT&T Corp. reported a third-quarter loss of $7.12 billion Thursday because of huge charges resulting from the company's retreat from traditional telephone services, which included at least 7,500 more job cuts and a write-down in the value of the company's long-distance network.

The loss amounted to $8.95 per share for the period ended Sept. 30. The results, which topped more pessimistic analyst forecasts, reflect write-down and severance costs of $12.47 billion, as well as a resulting $4.38 billion tax benefit and after-tax savings of $331 million on depreciation thanks to the write-down.

_____Earnings Watch_____
Schlumberger Sees Profit on Revenue Surge (Associated Press, Oct 22, 2004)
TXU Profit Soars 69 Percent, Beats Views (Associated Press, Oct 22, 2004)
Nextel Profit Rises, Ups Outlook (Reuters, Oct 22, 2004)
Schlumberger Posts Profit But Shares Fall (Reuters, Oct 22, 2004)
Weyerhaeuser Earnings Soar on Gains, Sales (Associated Press, Oct 22, 2004)
More Earnings News
_____The Markets_____
Dow Over 12 Months
Nasdaq Over 12 Months
S&P 500 Over 12 Months

In the corresponding quarter last year, AT&T earned $418 million, or 53 cents a share.

Third-quarter revenue totaled $7.6 billion, down 11.7 percent from $8.65 billion a year earlier, but the decline was less than many analysts had projected.

Shares of AT&T rose 22 cents, or 1.4 percent, to close at $15.80 on the New York Stock Exchange.

Business services revenue fell 10.4 percent, to $5.65 billion, as voice and data services suffered from ongoing price battles and competition from cell phones.

Consumer revenue fell 15.2 percent, to $1.98 billion, driven by a sharp drop-off in new customers following AT&T's decision to stop marketing local and long-distance service. Long-distance price wars and the loss of business to wireless and Internet-based calling also reduced revenue.

AT&T, still the nation's largest long-distance company with 26 million customers, said two weeks ago that it would reduce the book value of its assets by about $11.4 billion now that its network is expected to generate far less revenue from consumer voice traffic.

The decision to cut spending on customer acquisitions followed a federal court decision that will make it more expensive for AT&T to sell local service by leasing residential lines from the four regional phone companies -- which at the same time are luring away AT&T's long-distance customers.

When it announced the write-down, AT&T also said it was expanding this year's job cuts to more than 20 percent of the workforce, or at least 12,500 jobs. The company had previously projected a downsizing of 8 percent of the workforce, or about 4,900 positions. More than 9,000 of the affected employees have either already left the company or been notified they were being laid off.

To cover severance benefits and other costs related to those cuts, AT&T said it would record a charge of about $1 billion with the third-quarter results.

© 2004 The Washington Post Company