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SBC Communications Inc., the nation's second-largest local phone company, warned that it expects earnings for 2001 to fall below Wall Street expectations. The news sent SBC shares plummeting.
SBC says 2001 earnings per share will grow 11% to 14%, slightly below the 14.5% expected by analysts. The company says the shortfalls are because of the slowing economy, regulatory processes that have delayed the debut of long-distance services, and service problems at subsidiary Ameritech. SBC also says it expects fourth-quarter earnings of 56 to 58 cents a share, which meets analyst forecasts.
SBC shares fell as low as 14% early in the day, rebounding slightly in heavy trading. They ended the day down 12.66%, at $46.56.
Of course, not everyone believes the announcement was really bad news. Ken McGee, an industry analyst with Garner, thinks the shortfalls may have more to do with those making the estimates than with the company itself. "It reminds me of when someone is released from jail, and they go on to commit another crime, but you never hear the names of the people who paroled him," he says. McGee believes that financial analysts, many of whom "have never seen an entire business cycle," have come to expect too much from the companies they cover. Slowdowns and regulatory hurdles were just the "likely suspects" rounded up by the company to explain the disparity.
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