AT&T Writes Off $11.4 Billion In Third Quarter - InformationWeek

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10/21/2004
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AT&T Writes Off $11.4 Billion In Third Quarter

Massive loss results from write-down of assets and staff reductions; overall revenue drops 11.7% from a year ago because of declines in long-distance voice and data, the company says.

AT&T, the nation's largest long-distance company, reported Thursday a net loss of $7.1 billion for its third quarter. The company attributed the massive loss to an $11.4 billion write-down of the value of the company's network and other assets and a $1.1 billion charge resulting from staff cuts.

Excluding the special charges, AT&T reported adjusted net income for the quarter of $593 million, or 75 cents per share, compared with $418 million in net income, or 53 cents per share, in the third quarter a year ago. The results show "significant progress in transforming AT&T's cost structure and delivering a more effective business model for the future," AT&T chairman and CEO David Dorman said in a statement.

AT&T said earlier this month it would cut more than 12,000 jobs this year and write down more than $11 billion in assets because increased competition and unfavorable regulatory changes reduced the value of its network.

Overall revenue for the quarter was $7.6 billion, with $5.6 billion coming from business services. Revenue was flat compared to the second quarter and down 11.7% from a year ago, mainly because of declines in revenue from long-distance voice and data services, the company said. Revenue from business services was down 10.4% from a year earlier, but up slightly--0.6%--from the previous quarter, the company said.

There was one bright spot. AT&T said advanced business services such as IP-enabled Frame Relay and its Enhanced Virtual Private Network service generated 6.8% growth in revenue compared with a year ago.

AT&T's business-services unit said long-distance voice revenue dropped 16.3% for the quarter compared with a year ago, while local voice revenue grew 3.3%. Data services revenue declined 9.7%, because of weak demand and price competition, but showed a slight gain from the previous quarter.

"AT&T is the default carrier for business customers," says David Willis, VP of technology research services at Meta Group. But the company has been unable to capitalize on the problems experienced by its main competitors, such as the bankruptcy of MCI and the product problems at Sprint Communications, he says. "The only growth they showed was in IP services. Everything else is declining," Willis says. The huge asset write-down is an effort to make the company financially more attractive, he argues. "You could make a strong case that they're grooming themselves to be purchased."

Until that happens, AT&T remains the top choice for global companies looking for a carrier to provide worldwide communications services. Says Willis: "AT&T is still the only company that has breadth outside the U.S. and depth inside the U.S."

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