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AT&T Profit Rises 8 Percent

July 21, 1994

NEW YORK (AP) _ AT&T Corp. on Thursday reported an 8 percent increase in second-quarter profit and a surge in revenue, indicating it has recovered some business lost in the long-distance brawl with competitors.

The nation’s biggest telecommunications company also was helped by strong growth in telephone equipment sales, particularly for cellular systems.

AT&T earned $1.13 billion, or 83 cents per share, in the quarter ended June 30. It earned $1.04 billion, or 77 cents per share, in last year’s second quarter before a 3 cent per-share charge for an accounting change.

Revenue rose 9 percent to $17.7 billion from $16.3 billion a year ago.

″We expect stronger performance in the second half of the year driven by the seasonality of our product business and the momentum we have developed across the company,″ said Richard Miller, AT&T’s chief financial officer.

AT&T shares gained 62 1/2 cents to $53.75 on the New York Stock Exchange.

″Revenue growth was the big story,″ said Tony Ferrugia, telecommunications analyst at A.G. Edwards in St. Louis. ″Their long distance minute and revenue growth was very good.″

Per minute calling volume increased 7 percent over a year ago, a growth rate slightly above the first quarter and a percentage point higher the fourth quarter of 1993.

Earlier this week, MCI Communications Corp. reported traffic growth of 14 percent in the second quarter. That’s a pace-setting rate but slower than it has previously experienced, an indication that AT&T has grabbed back some lost business. The No. 3 long distance company, Sprint Corp., had a 12 percent gain in traffic in the quarter.

AT&T said its volume growth was led by new customers for toll-free 800 lines. The company also credited a change in its consumer marketing, including the launch of products around the ″True″ brand name.

Revenue from long-distance and other telecommunications services was up 5 percent from the second quarter of 1993.

Sales of telephone equipment and computer systems rose 19 percent, led by wireless products as cellular phone companies improve their systems.

Revenue from financial services, including the AT&T Universal credit card, was up 23 percent. The company had a 2 percent decline in revenue for rentals and other services.

The company’s gross margin was 40.0 percent, up slightly from 39.8 percent a year ago.

AT&T’s computer subsidiary, AT&T Global Information Solutions, reported an 11 percent jump in sales and posted operating income of $14 million, ending three quarters of losses.

The subsidiary, formerly known as NCR Corp., has gone through wrenching cost cuts to adjust to shifting demand from high-margin big computers to less profitable personal computers.

AT&T last week signed an agreement with the Justice Department that settled antitrust issues surrounding its proposed merger with McCaw Cellular Communications. The deal $12 billion still requires approval from a federal judge and the Federal Communications Commission.

″We fully expect to be talking about a combined AT&T and McCaw when we talk about our third quarter earnings,″ Miller said.

AT&T employed 300,100 people at midyear, down from 308,900 at the start of 1994 and 315,900 a year ago. The sharpest payroll cuts during the past year have been in the company’s core long-distance operation. In past six months, however, the deepest cuts have been in the computer subsidiary.

For the first half of the year, AT&T earned $2.22 billion, or $1.63 per share, up 15 percent from $1.94 billion, or $1.44 per share, before $7.8 billion in special charges for changing the way it accounts for retirement benefits.

With those charges, the company lost $5.83 billion, or $4.32 per share, in the first half of 1993.

Six-month revenue was $34.3 billion, up from $32.0 billion a year ago.