SBC to pare jobs after earnings fall 31%

Big phone company also will cut spending on Internet project

October 23, 2001|By BLOOMBERG NEWS

SAN ANTONIO - SBC Communications Inc., the second-biggest U.S. local-phone company, said yesterday that it will eliminate "several thousand" jobs and reduce spending on an Internet project after third-quarter profit fell 31 percent.

Profit fell to $2.1 billion, or 61 cents a share, from $3 billion, or 88 cents, in the year-earlier quarter, when SBC sold assets in Europe. Sales rose less than 1 percent to $13.5 billion, including SBC's 60 percent share of Cingular Wireless. SBC didn't specify how many of its 216,000 workers would be fired.

SBC and other phone companies are shedding costs as the pace of sales slows. Companies in SBC's 13-state region have fired more than 160,000 workers, Chief Executive Officer Edward Whitacre said on a conference call. The company will scale back a fast-data project called Pronto. Fewer customers are ordering services such as fast Internet access and caller ID, analysts said.

"That's the area that will be weak until the economy strengthens," said Jeffrey Kagan, an independent telecommunications analyst in Atlanta. "Growth in the extra services that people might want but not need is where a lot of the profits are."

SBC is the latest phone company to reduce spending and cut back projects started when its shares were rising. Last week, BellSouth Corp. said it will cut 3,000 jobs, while Sprint Corp. lowered its spending forecasts and said it will eliminate 6,000 positions and a phone-and-data project.

Shares of San Antonio-based SBC, which sells service in the Southwest, Midwest and in California, fell $2.24, or 5.1 percent, to $41.40. They have dropped 18 percent in the past year.

Excluding a $73 million pension settlement gain, SBC would have earned $2 billion, or 59 cents. On that basis, SBC was forecast to have profit of 60 cents, the average of analysts polled by Thomson Financial/First Call.

The year-earlier period included a $1.1 billion gain mainly from selling investments in Europe, said spokesman Larry Solomon.

SBC expects per-share profit before one-time items this year at the bottom of its previous forecast of $2.35 to $2.40. The company has lowered forecasts three times this year.

"We don't see anything that would indicate a quick turnaround in the economy," Whitacre said on the call. "It's going to be difficult to get any meaningful momentum" in sales. Whitacre, who said the U.S. economy is unlikely to rebound in 2002, declined to forecast next year's results.

Cingular Wireless, the second-biggest U.S. mobile-phone company, is a venture of SBC and BellSouth. Excluding Cingular, SBC's sales fell 16 percent to $11.3 billion in the quarter.

Phone lines fell by more than 300,000 from the second quarter to 60.2 million, SBC said.

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