Lower Earnings Forecast Trims AT & Ts Sails


Influential Salomon Smith Barney analyst Jack Grubman slashed his earnings projections for AT & T Corp. last week, sending the already-ailing stock into a nosedive that saw it hit a 52-week low.

AT & T shares, which have plummeted more than 40 percent since March 29, fell to $32.50 each in midafternoon trading June 26-a 52-week low-before rebounding slightly to close at $33.

Trading was fast and furious for AT & T, with more than 25 million shares changing hands June 26. The normal average daily volume for the stock is about 18 million shares. AT & T was the second-most-heavily traded stock June 26, behind Motorola Inc.

Grubman cut his 2000 cash-earnings estimate for AT & T to $2.33 per share from $2.40, citing a new long-distance rate plan that could slash earnings by about $78 million this year.

Despite lowered expectations, Grubman continued to rate AT & T shares as a "buy."

He said the revision does not reflect any new operational difficulties at AT & T-he still expects the company to make its goal of between 400,000 and 500,000 cable-telephony customers by the end of the year. But AT & T still has execution problems that could take the rest of 2000 to address.

The earlier-than-expected closing of its MediaOne Group Inc. acquisition; recent wireless-asset buys in Houston, San Diego and San Francisco; and delays in the restructuring of Excite@Home Corp. should affect growth, Grubman wrote.

He added that AT & T would have to have a "tremendous second half" in order to meet an internal business-revenue growth target of 8 percent for the year.

AT & T closed its $44 billion purchase of MediaOne June 15, about two weeks ahead of Grubman's timetable. As part of the deal, AT & T will issue an additional 600 million shares to MediaOne shareholders.

The Excite@Home restructuring-in which AT & T would increase its voting control of the data-over-cable-service provider from 56 percent to 74 percent-has been delayed by a lawsuit by Cablevision Systems Corp. to block the transaction.

As part of the deal, AT & T agreed to offer Excite@Home partners Cox Communications Inc. and Comcast Corp. the option of selling their Excite@Home shares for $48 each.

Excite@Home, AT & T, Cox and Comcast agreed to delay the closing of the deal until Cablevision has its day in court.

Grubman said the accelerated MediaOne closing will cause an additional two weeks of dilution that will spill over into second-quarter results. AT & T had expected the merger to cause dilution of about 20 cents per quarter. The earlier closing should result in second-quarter earnings per share coming in about 3.5 cents less than earlier guidance, he added.