CNET también está disponible en español.

Ir a español

Don't show this again

Christmas Gift Guide
Mobile

Sprint cuts estimates for core operations

The telecom company cuts earnings estimates for its core operating business, saying it has been hurt by the bankruptcies of some of its customers.

Sprint cut earnings estimates for its core operating business, saying it has been hurt by the bankruptcies of some of its customers.

Sprint's FON Group includes long-distance and local telephone service as well as its directory-publishing businesses. On Tuesday, the Westwood, Kan.-based company said earnings before interest, taxes depreciation and amortization (EBITDA), would be between $4.3 billion to $4.4 billion for the year, with earnings per share to be between 28 cents and 30 cents in the second quarter and between $1.13 to $1.18 a share for the year.

The company had already warned in April that it would miss expectations for the second quarter and the full year. The company had previously predicted earnings for the quarter would be between 30 cents and 32 cents, and earnings for the year would be between $1.31 and $1.39.

Capital expenditures for the FON Group will be around $5.9 billion for the year, about $300 million below the previous forecast of $6.2 billion.

The problems centered on the company's Global Markets segment; the local telephone operations and directory business results are expected to be in line with earlier predictions, the company said.

Sprint said it has incurred higher expenses related to bad debts due to the bankruptcies of some of its wholesale customers.

There have been several high-profile flameouts in the telecommunications sector recently, including companies such as digital subscriber line (DSL) carrier NorthPoint, which caused a stir when it went bankrupt and left 100,000 customers without broadband service. Other companies including Covad Communications and Rhythms NetConnections have also struggled in a weakening economy.

Indeed, Sanford Bernstein analyst Paul Sagawa recently listed bankruptcies as one of the factors responsible for what he predicted would be an overall drop in telecommunications spending in 2001.

Sprint also said that its recently launched Web-hosting and professional-services businesses were growing slower than it had anticipated.

But the news didn't seem to faze analysts much; both Credit Suisse First Boston and UBS Warburg reiterated "buy" ratings on the stock Wednesday morning, although they did lower earnings expectations in light of the new company guidance.

CSFB analyst Daniel Reingold, who lowered his price target on the stock $1 to $28, said in a research note that factors in his rating were "the continued stability of the local telco division (worth an estimated $20 per share) and our continued belief that FON is an attractive acquisition candidate."