AT&T posts $7.1bn loss on impairment charge

AT&T has reported a net loss of $7.1bn (£3.89m), for the third quarter of 2004, however that loss included asset re-evaluation...

AT&T has reported a net loss of $7.1bn (£3.89m), for the third quarter of 2004, however that loss included asset re-evaluation and other charges of $12.5bn.

AT&T's third quarter financial statement included asset impairment charges of $11.4bn and net restructuring and other charges of $1.1bn. The company announced that it would include the charges in the third quarter, which ended on 30 September.

The asset-related charges were caused by "pricing pressure and the evolution of services toward newer technologies in the business market as well as changes in the regulatory environment, which led to a shift away from traditional consumer services", said AT&T.

The quarter's net loss compares to the net income of $418m that the company reported in last year's third quarter.

AT&T reported third-quarter 2004 consolidated revenue of $7.6bn, which included $5.6bn from AT&T Business and $2bn from AT&T Consumer. Consolidated revenue was down 11.7% from the third quarter of 2003.

The company blamed the decline on sagging long-distance voice and data revenue. Nonetheless, AT&T exceeded the revenue consensus expectation from analysts polled by Thomson First Call of $7.3bn.

AT&T is encouraged by its competitive position, said David Dorman, the company's chairman and chief executive. "Our third-quarter results reflect significant progress that we are making in transforming AT&T into a more effective competitor," Dorman said.

"In a difficult and often chaotic market, we are successfully improving our business fundamentals, reducing costs, and driving significant cash flow."

Earlier this month, AT&T announced it was laying off about 20% of its workforce this year, a change from the original plan to cut 8% of the staff. The new layoffs affect about 7,400 employees.

In July, AT&T announced it was shifting its focus away from residential telephone services. The company's long-distance revenue was down 16.3% from the third quarter of 2003.

"Clearly, we have made some tough choices this year," Dorman said. "However, as our third-quarter results demonstrate, those choices are beginning to pay off."

Excluding the asset impairment and other charges, AT&T posted an adjusted net income of $593m, for the third quarter of 2004, compared to an adjusted income from continuing operations of $458m for the third quarter of 2003.

The adjusted net income included an after-tax benefit from lower depreciation of $331m, due to the asset impairment charges.

The company's third-quarter 2004 consolidated operating loss was $11.3bn. Excluding the asset impairment and other charges, adjusted operating income was $1.2bn.  AT&T posted an operating income of $829m in the third quarter of 2003.

Grant Gross writes for IDG News Service

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