SBC Falls on Q1 Results, Outlook

SBC Communications (NYSE: SBC) was downUS$1.52 to $38.48 in morning trading Monday, after reporting a drop infirst-quarter earnings and warning that results for the rest of the year maybe hurt by a weak economy.

The San Antonio, Texas-based Baby Bell said that investments in “growthinitiatives” and a slowing economy resulted in a decline in earnings beforespecial items for the quarter ended March 31st to $1.7 billion, or 51 centsper share, from $1.9 billion, or 56 cents, in the same period last year.Revenue rose 4.7 percent to $13.1 billion.

Net income rose to $1.9 billion, or 54 cents per share, from $1.8 billion,or 53 cents. Latest quarter results included pension settlement gains of$330 million, as well as $205 million of charges relating to the company’s cableoperations.

For the year as a whole, the company said it is now looking for earningsbefore one-time items of $2.35 to $2.40 per share. Management was previouslyexpecting earnings of $2.46, reports said.

“The economy is having a greater impact on our business than we projected,”said chairman and chief executive officer Edward E. Whitacre, Jr. “We handledthe first-quarter revenue shortfall well, due to very disciplined expense management.”

Data revenue rose almost 40 percent during the first quarter to $2.1billion, as SBC added 187,000 new customers to its digital subscriber line(DSL) business, for a total of 954,000.

SBC said that demand for high-speedInternet access remains strong, and that its DSL services are now available to21.7 million customers, up from 12.9 million a year ago.

Cingular Wireless, a joint venture with BellSouth that was launched inJanuary, won 854,000 new subscribers during the quarter, for a total of 20.5million, SBC said. Cingular’s wireless services revenue totaled $3.1 billionin the quarter.

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