SBC’s Net Income Falls 41 Percent but Beats Expectations

By Terry Maxon, The Dallas Morning News

Oct. 21–SBC Communications Inc. said Thursday that its net income dropped 41 percent in the third quarter, but it beat analysts’ expectations after excluding one-time items.

The San Antonio-based company reported net income of $1.25 billion, or 38 cents a share, on revenue of $10.32 billion. In third quarter 2004, SBC had $2.09 billion in net income, or 63 cents, on $10.29 billion in revenue.

However, without the one-time items, SBC had income of 47 cents a share in the 2005 period, compared with 38 cents in 2004.

Last year, earnings from continuing operations were $1.2 billion, which excludes a gain of $827 million, or 25 cents per share, from the sale of some directory operations.

Analysts surveyed by Thomson First Call had expected SBC to earn 41 cents. SBC shares closed up 13 cents, or 0.6 percent, at $22.54 in New York Stock Exchange trading.

The 2005 adjustments included SBC’s share of Cingular’s $637 million in merger costs and $96 million from Hurricanes Katrina and Rita.

SBC attributed its results to better profit margins on its traditional wireline business and increased profits passed through from Cingular, which is nearing the first anniversary of its merger with AT&T Wireless.

In the quarter, SBC generated $3.3 billion in cash from its own operations, and got an additional $1.4 billion in cash from Cingular, said Rick Lindner, SBC’s chief financial officer.

“We’ve had a very strong third quarter,” he said. “We’re competing effectively with great products, service, and value, our revenues were up, margins were up substantially, cash flow was strong.”

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