IXC 1Q loss widens, plans 2Q charge

IXC (Nasdaq: IIXC) reported Tuesday a loss of $42.2 million, or $1.60 a share, far below expectations. The company also expects a second quarter charge of up to $35 million to downsize its wholesale switching business. Shares rose 3/4 to 34 in morning trade.

The First Call Corp. consensus estimate of seven analysts was looking for a loss of $1.29 a share. In the year-ago period, IXC lost $17.9 million, or 83 cents a share.

Revenue for the quarter rose $161.4 million from $157.6 million in the same period last year. Private line revenue rose 63 percent to $70.9 million and $5.2 million from data/Internet services sales rose ten-fold to $5.2 million. Switched services revenue dropped 32 percent to $77.7 million after Teleglobe Inc.'s (NYSE: TGO) Excel Communications, its largest customer, began using its own network. Miscellaneous sales were $7.6 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) dropped to $4.7 million, from $20.3 million last year. IXC blamed higher infrastructure costs and new charges by the Federal Communications Commission on long-distance switching for the decline.

"Detailed analysis in recent months has confirmed that changed economics in the switched wholesale business have created a situation where results in this non-strategic segment are overshadowing the solid progress of our core businesses. That cannot continue," said CEO Ben Scott in a statement.

The company expects to downsize its wholesale switching operations and post a charge of between $25 million and $35 million in its second quarter. This one-time charge will take care of cutting staff, equipment write-down and decommissioning costs.

"With successful implementation of our revised action plan, together with continued strong growth in our other businesses, we expect to deliver improved results over the balance of the year,'' Scott said.

IXC is a voice and data transmission provider that completed its New York-to-Los Angeles fiber-optic network last year.

In November, IXC warned that costs for new services could increase by 18 percent, quarter to quarter, well above an original forecast of 10 percent.