GTE to spend big bucks on "high-speed data initiatives"
[Isn't GTE mostly a CSCO customer?]
nytimes.com
Excerpt: "Linda Meltzer, a telecommunications analyst for UBS Securities.
Kelly said the company would seek to invest a big part of the proceeds
from the asset sales in high-speed data initiatives.
Like every other big telecommunications company, GTE has been
trying to bolster its data capabilities in order to take advantage of the
growing demand for corporate data systems and for Internet access. "
April 3, 1998
GTE to Post Loss in First Quarter
By SETH SCHIESEL
GTE Corp. said Thursday that it would post a loss for the first
quarter and sell billions in assets as the big local telephone
company continues to remake itself to compete in the increasingly hectic
telecommunications industry.
The company also said it had formally withdrawn its offer to acquire
MCI Communications Corp., the No. 2 long-distance provider, for
$28 billion in cash. Many analysts already considered GTE's offer moot
because MCI's shareholders last month approved a rival $37 billion bid
for the company from Worldcom Inc.
But GTE's offer technically remained on the table, partly because the
MCI-Worldcom deal has not won approval from regulators. By
formally withdrawing its offer, GTE could assuage investors who had
worried that acquiring a company of MCI's size would seriously harm
GTE's financial results over the next few years.
Thursday's announcement ensured harm only to GTE's financial results
for the quarter ended last month. The company said it would take an
after-tax charge of $802 million, or 83 cents a share. The charge would
reflect the costs of an obscure Canadian accounting change, previously
announced staff reductions and aborted experiments in advanced video
services.
Over the last six months GTE has announced that it would reduce its
work force of 114,000 people by about 1,500 positions, or about 1.3
percent. Many of those jobs will be cut from the company's wireless
operation and as a result of the company's headquarters relocation from
Stamford, Conn., to Irving, Texas, near Dallas.
GTE said Thursday that the job cuts would help the company reduce its
annual costs by $500 million by the spring of 2000.
The company also planned to reap between $2 billion and $3 billion by
selling underperforming operations. Most of that money would come
from the sale of between 1.1 million and 1.7 million of GTE's 21 million
local phone lines to other carriers.
"We are continuing to streamline our traditional businesses and support
functions, both to sharpen our strategic focus and to reduce our overall
cost structure," Charles Lee, GTE's chairman, said in a statement
Thursday. "The resources we generate through the efforts announced
today will be redeployed into other strategic initiatives in keeping with
our overall goal to become a national provider of integrated
telecommunications services."
GTE provides local phone service in 28 states. People close to the
company said the sales would be concentrated in 10 of those states.
With $23.3 billion in revenue last year the company was the No. 3 local
phone carrier, behind Bell Atlantic Corp. and SBC Communications
Inc.
The company also said it intended to sell its Airfone operation, which
provides telephone service in commercial airplanes. GTE would not say
how much revenue the Airfone unit generated last year.
Michael Kelly, GTE's chief financial officer, said in an interview that the
$2 billion to $3 billion in sales would also include the disposal of
additional assets besides the local phone properties and the Airfone
division. He would not identify those additional assets.
After taking the $802 million charge, GTE will probably post a loss of
roughly $174 million, or 18 cents a share, for the first quarter when it
announces financial results April 14. The company said it was
comfortable with the earnings estimates of Wall Street analysts,
discounting the charge.
The consensus prediction Thursday of GTE's first-quarter profit by
analysts polled by First Call, a financial research firm, was 65 cents a
share, or about $628 million.
Financial analysts were generally unperturbed by Thursday's
announcement.
"Clearly the initiatives they're taking are a continuation of what GTE has
been doing, which is essentially wiping out their costs so they could
have more flexibility, both internally and to make acquisitions," said
Linda Meltzer, a telecommunications analyst for UBS Securities.
Kelly said the company would seek to invest a big part of the proceeds
from the asset sales in high-speed data initiatives.
Like every other big telecommunications company, GTE has been
trying to bolster its data capabilities in order to take advantage of the
growing demand for corporate data systems and for Internet access.
Last May, GTE announced that it had agreed to acquire BBN Corp.,
one of the United States' biggest providers of Internet service, for $616
million. That month the company also bought 25 percent of a national
fiber-optic communications network under construction by the Qwest
Communications unit of Anschutz Corp.
The company announced its plans after the stock market closed. In
after-hours trading, shares of GTE slipped to $60 from its close of
$60.4375. The stock gained $1.4375 in its regular session.
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