| AT&T Does IT in the Last Quarter before Takeover |
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AT&T has swung back into profit in what could be the last quarter before the company is acquired by former subsidiary SBC Communications Inc. The company said Friday that earnings rose $520 million, or 64 cents per share, in the third quarter, compared with a year-earlier loss of $7.1 billion, or $8.99 per share, that included an asset write-down.
The company, which in January agreed to be acquired by SBC for $16 billion, also boosted its revenue and profit margin forecast for the year. Its shares rose more than 2 percent in morning trading.
Looking ahead, AT&T raised its full-year sales forecast to $26.5 billion, compared to its prior target of $25 billion to $26 billion.
The company also predicted operating margins, excluding items, would be higher than expected -- in the low teens on a percentage basis. AT&T has made a concerted effort to cut costs and improve the efficiency of its network by adopting new technologies.
Revenue fell 13.3% to $6.62 billion, as the long-distance calling and data businesses continued to shrink, AT&T said.
Revenue from business services accounted for $5.1 billion of the total, and consumer services generated $1.5 billion.
Analysts said AT&T had slashed costs more than anticipated.
"Clearly, the past few quarters of above-expectation results have shown that the wheels have not come off at AT&T in advance of the merger," Sanford C. Bernstein analyst Jeff Halpern told the press.
Last year, AT&T said it would stop marketing to residential customers, blaming changes in federal regulations governing how it leased lines from dominant local telephone companies. Those companies, including SBC, had been able to attack AT&T’s long-distance business by bundling local and long-distance service.
The retreat from residential eventually led to SBC’s deal to purchase AT&T and reunite parts of Ma Bell broken up in the 1980s. It also allowed AT&T to cut the value of its assets last October by $11.4 billion.
With AT&T shareholders having approved the $16 billion deal with SBC, AT&T shares are trading as a proxy for SBC. AT&T Chairman and Chief Executive David Dorman said he was confident the deal would close by the end of this year.
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