AT&T Earnings Show Continued Shift From Voice To Data

The trend continues: AT&T's poor voice-services results are being offset by strong growth in its broadband and data services.
AT&T keeps moving further away from its former focus as it follows through on the split of the company revealed last year. The company Monday reported second-quarter financial results that showed its struggling long-distance voice services being offset by growth areas such as broadband and data/IP services.

Consumer long-distance services dropped nearly 20% from the same period last year, to $3.8 billion, and business long-distance services were buoyed significantly by services such as IP connectivity, virtual private networking, and Web hosting, yielding a 1.7% drop-off in overall business services, to $7.1 billion. AT&T Broadband, meanwhile, rose to $2.6 billion, a 13% increase when including the second-quarter 2000 results of MediaOne, which AT&T acquired last year. Overall, for the quarter ended June 30, AT&T posted a loss of $149 million, or 10 cents per diluted share, on revenue of $13.3 billion, compared with a profit of $1.8 billion, or 48 cents per share, on revenue of $13.7 billion last year.

Chairman and CEO C. Michael Armstrong noted during a conference call with analysts that AT&T's 5.9% revenue drop-off would have been a gain of 0.4% had AT&T Wireless Services been included in the overall results. AT&T Wireless was spun off July 9 and will report separate earnings Tuesday. In the absence of AT&T Wireless, much of the company's enthusiasm focused on AT&T Broadband, which has been the subject of ongoing acquisition talks with Comcast Corp. Armstrong said AT&T rejected Comcast's recent $44.5 billion offer because AT&T Broadband is the fastest-growing broadband operation in the industry. "The Comcast proposal just did not reflect Broadband's current value," he said.

Forrester Research analyst David Cooperstein says AT&T's rapidly accelerating shift from voice services to data raises interesting questions about the future of the company once its split-up is complete. Cooperstein says he's especially concerned by the impact voice services continue to have on AT&T's business services. "Once broadband is spun off, what's left?" he asks. "The jewels are being exposed as cubic zirconium."

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