AT&T Corp. posted a $12.7-billion loss for the second-quarter as a better-than-expected operating profit was erased by a huge drop in the market value of cable TV businesses bought for top dollar during the technology bubble.
The net loss, equivalent to $3.49 per share, reflected a writedown of $13.1-billion in the book value of the AT&T Broadband cable unit that is being sold to Comcast Corp. in a deal expected to close later this year.
Excluding that revision, mandated by new accounting rules adopted this year, AT&T would have shown a profit of 7 cents per share from its core operations consisting of long-distance, cable and business services. Analysts surveyed by Thomson Financial/First Call were expecting earnings on that basis of 3 cents per share. In the same period last year, those businesses showed an operating profit of 4 cents a share.
Revenues totaled $12.1-billion in the just-ended quarter, a decline of 6.2 percent compared to the sales at the same operations in the year-ago period. The company attributed most of the drop to the continuing decline in revenues across the long-distance industry, which is being ravaged by competition from cell phones, e-mail and rival offerings from local telephone companies.
AT&T said the quarter's declining revenue was partially offset by improved performance at AT&T Broadband, including growth in cable-based telephone service, high-speed Internet connections and digital video.
The company also indicated that its business services unit has benefited from the greater financial woes of its rivals, some of whose customers have been switching communications providers out of fear of service disruptions. Though no names were mentioned, anecdotal evidence suggests that AT&T may be gaining customers from WorldCom, which on Sunday filed for bankruptcy protection amid a $4-billion accounting scandal.
"AT&T Business is encouraged by signs of a "flight to quality' as customers value AT&T's financial and technological strength," said AT&T Chairman and CEO C. Michael Armstrong.
Going forward, the company issued a mild improvement to its worrisome outlook, projecting that revenue declines in long distance and business services will be slower than expected.