AT&T Posts Profit

AT&T reported revenue of $8.8 billion in the quarter vs. $9.6 billion in second-quarter 2002. Of the $8.8 billion, AT&T Business Services generated $6.4 billion and AT&T Consumer Business generated $2.4 billion.

Despite an overall strong showing for the quarter, a weak economy continues to affect enterprise spending, which remains flat to down, said David Dorman, chairman and CEO of AT&T, Bedminster, N.J.

Other trends affecting AT&T and other telecom players include executive replacements, increased competition, oversupply and confusion created by federal regulations and bankruptcies, Dorman said. For AT&T, the game plan is to control and reduce costs and to maintain a strong financial balance sheet, he said.

The company's free cash flow for the quarter was $1.4 billion, and it ended the quarter with $10.8 billion in net debt, a decrease of $1.2 billion compared with the first quarter of 2003.

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Part of AT&T's free cash flow will be used to invest in new offerings, Dorman said. This quarter, AT&T signed on AT&T Wireless as its wireless provider. Also, the carrier has already migrated its DSL customers to Covad and continues to refer new customers to the DSL provider. AT&T also introduced several bundled local and long-

distance offerings.

AT&T is also consolidating its legacy network into a single IP system. "This will simplify customers' networking requirements and deliver on our promise of anything, anywhere communications," Dorman said.

The company also expects to cut its management ranks by 9 percent, up from a previously reported 5 percent cut. Dorman said this move will save AT&T about $200 million a year. As a result, management layers will be reduced to seven or eight from 14. AT&T's officer and director head count has already been reduced by 30 percent this year.

"Given the progress we've made in many areas, we believe we'll be a primary beneficiary of the eventual recovery in this sector as far as spending and demand, although there is still much more work to be done," Dorman said.