NEW YORK -- AT&T; Corp. said yesterday that third-quarter earnings rose 68 percent to a record as the largest U.S. long-distance phone company slashed costs and boosted sales at the fastest rate in almost two years.
Profit from continuing operations rose to $1.81 billion, or $1 a share, from $1.08 billion, or 60 cents, a year earlier. That beat the average estimate of 95 cents from analysts polled by First Call Corp. Revenue rose 4.3 percent to $13.65 billion.
Since taking over a year ago, C. Michael Armstrong, AT&T;'s chairman and chief executive officer, has reversed profit declines by shedding 18,000 jobs and accelerating sales growth. He expanded AT&T;'s wireless and Internet businesses and pushed into the $100 billion local phone market. That's spurred sales growth, led by a 19 percent rise in wireless services. Second-quarter sales grew 1 percent.
"I'm pleasantly surprised, almost shocked, that Armstrong in one year has turned the culture of AT&T; around," said John Nichol, vTC portfolio manager at the Ohio Public Employees Retirement System. "He's beginning to deliver on what he said."
The New York-based company's shares rose 43.75 cents, to $64.25. The stock has risen 31 percent since Armstrong took over Nov. 1, compared with a 17 percent gain in the benchmark Standard & Poor's 500 index.
Before Armstrong joined AT&T;, the company was losing market share to rivals in its main long-distance business, lacked a clear international strategy and was struggling to build new Internet and local operations.
Rivals MCI WorldCom Inc., Sprint Corp. and Qwest Communications International Inc. are still taking market share, and many of AT&T;'s investments, like its agreement to buy cable provider Tele-Communications Inc. for $47.8 billion, won't pay off for another year or more.
AT&T; "faces enormous execution issues and the likelihood of some regional Bell entry into its core market in 1999, which will make the market even more difficult," said Anna-Maria Kovacs, an analyst at Janney Montgomery Scott Inc.
Third-quarter long-distance revenue rose 0.5 percent from a year earlier, while volume, or time on its network, was up 3.1 percent. That's less than the second-quarter's 4.4 percent volume gain.
Total operating expenses fell 8.8 percent to $10.34 billion. Selling, general and administrative expenses fell 15 percent and were 24.4 percent of sales, down from 29.8 percent.
AT&T; said on a conference call that it has cut more than 15,000 jobs so far in 1998 and plans to shed as many as 18,000 by the end of the year. That is part of a plan to reduce selling, general and administrative expenses to 22 percent of sales by 2000.
"We're getting the fat out of the company," Armstrong said.
AT&T; said it expects fourth-quarter earnings per share of 95 cents to $1 and 1998 earnings per share of $3.40 to $3.45. Analysts polled by First Call expect the company to earn 99 cents a share this quarter and $3.41 for 1998.
Pub Date: 10/27/98