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AT&T Profit Drop Cushioned by iPhone Adoption

Wireless products and services remain AT&T Inc.’s (T) money-making mainstay. TV services? Not so much.

AT&T – now the nation’s second-largest wireless provider – on Wednesday reported a 23.6 percent drop in fourth-quarter profit, but iPhone adoption soared by 1.9 million new accounts.

Those additional subscribers helped cushion the Bell company’s earnings fall. AT&T saw net profit of $2.4 billion, or 41 cents per share, in 2008’s fourth quarter, down from $3.14 billion, or 51 cents per share, a year earlier. Sales were higher, though, thanks in part to AT&T’s exclusive partnership with Apple Inc. (AAPL) for the ever-popular iPhone. Revenue amounted to $31.1 billion, an increase of 2.4 percent year-over-year, but the numbers still didn’t match analysts’ projections of $31.3 billion.

AT&T’s earnings took a hit for several reasons, the company said. Operations spending was higher than usual, for one thing. There are ongoing merger costs to pay. Plus, AT&T is laying off 12,000 workers and forked out severance packages for those cuts. Finally, upfront iPhone subsidies, and continued declines in the local and long-distance division, impacted the numbers as well.

AT&T’s stocks were trading downward in late morning activity, hitting $25.18, a drop of nearly 3 percent.


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