another $2 billion down the drain....Al, yer gotta print us up some mo'...
By: Cecily Barnes, CNET News.com
10/6/00 9:50:00 AM
Source: News.com
In a strongly worded research note, Salomon Smith Barney analyst Jack B. Grubman cut his ratings on AT&T on Friday, saying investors have not taken into account the charge AT&T could face in the near future related to a potential increase in its holdings of Excite@Home>Excite@Home>Excite@HomeIn>Excite@HomeIn March, AT&T, which owns a majority stake in Excite@Home, gave cable companies Cox Communications and Comcast the option to sell holdings of 30 million shares each of Excite@Home at $48 per share, in exchange for their board seats.
AT&T agreed to make up the difference between the $48 price and Excite@Home's actual stock price, trading today at $10.44. If Cox and Comcast exercise this option, AT&T could take a hit of up to $2 billion.
"We believe this is not yet factored into 'Street' consensus estimates for 2001," Grubman wrote. "With Excite@Home trading at $12 per share, there would be a $2 billion liability on AT&T's balance sheet if AT&T had to file a 10Q today," he wrote, referring to a quarterly earnings statement filed with the Securities and Exchange Commission.
Grubman cut AT&T's rating to "outperform" from "buy" and lowered his earnings projections for 2000 to $1.65 from $1.73, and for 2001 to $1.55 from $1.97. He further justified his downgrade by saying the company has "sluggish fundamentals" and lacks the positioning of other telephone carriers.
"We believe AT&T is in a strategic bind," Grubman wrote. "It does not have the pervasive connectivity to end users like a Bell company, and also lacks the global data/IP network that WorldCom has."
Shares of AT&T fell $1.13, or 3.9 percent, to $27.75 at midmorning Friday. The stock has fallen more than 50 percent from its 52-week high of $61. |
