AT&T Falls on Earnings, Outlook

decline weanticipated when we put our new strategy in place three years ago,” saidchairman C. Michael Armstrong. “Our results reflect the acceleration of thatdecline, but also clearly demonstrate that we are successfully scaling ourgrowth businesses.”

The company said growth in its business and broadband divisions did notoffset declines in long-distance and consumer voice services. Revenue rosejust 3 percent in the quarter to $16.9 billion, while earnings beforespecial items fell to 26 cents per share, from 53 cents in the year-earlier quarter.

After all charges, the company lost $1.7 billion, or 45 cents per share, comparedwith earnings of 36 cents a year earlier.

The company said it expects a percentage decline in consumer revenue “in themid- to high teens” for the year as a whole, as a result of “ongoingtechnology substitution,” consumers switching to lower-priced optionalcalling plans and prepaid calling cards, and competition from regional Belltelephone companies, which entered the long-distance market this year.

Charges for the launch of digital subscriber line (DSL) services and othernew products are also likely to hurt results as the company spends money tomarket the new products and position itself for competition, AT&T said.

Revenue at AT&T Business is likely to be below year-earlier levels in thefirst quarter, and “flat” with 2000 levels for the year as a whole, “given continued long-distance pricing pressure, volumeerosion due to technology substitution, and changes in product mix,” thecompany said.

Broadband services will provide a bright spot in the year ahead, AT&T said.The rapid subscriber growth in 2000 should result in pro forma revenue growth”to the mid-teens” for 2001, according to the company.

AT&T plans to issue shares inits broadband unit in the fall as part of a plan to reorganize its fourbusinesses into separate companies.

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