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AT&T cuts growth targets -- again

AT&T (NYSE: T) lowered its fourth quarter earnings and revenue targets again on Thursday, citing lower-than-expected revenue growth from its consumer and business long distance service.

The company said revenue growth in the quarter will be 2.5 percent to 3 percent, down from already-lowered guidance of 4 percent to 5 percent. AT&T lowered projections following its third quarter earnings. Fourth quarter earnings will be in the range of 26 to 28 cents a share with cash earnings in the 45 to 47 cents a share range. Both of those projections are about 5 cents a share below AT&T's previous targets.

Consensus estimates for AT&T were 31 cents a share excluding its stake in Excite@Home (Nasdaq: ATHM), according to earnings tracking firm First Call Corp.

AT&T said its business services revenue is expected to grow 1 percent, down from its previous projection of 2.5 percent. The company cited "industry-wide pricing pressures" and contract changes. AT&T's consumer long distance service looks even worse. The company said sales will decline at a "mid-teens rate. The company projected an 11 percent decline.

This is the second time in two months that AT&T has cut its growth targets. In October, reported lackluster third quarter results and slashed its growth outlook for the next 15 months.

AT&T rivals Worldcom (Nasdaq: WCOM) and Sprint (NYSE: FON) also recently issued profit warnings.

On a positive note, AT&T said its data and Internet revenue will maintain its third quarter growth rate of 20 percent. AT&T's broadband unit is expected to show growth of 10.8 percent with AT&T Wireless (NYSE: AWE) delivering growth of 30 percent to 35 percent.

The company said it would deliver its outlook for 2001 when it reports earnings in late January. AT&T, however, indicated that its 2001 outlook would change for its consumer and business long distance services.

AT&T, which has been reeling from falling long distance prices, recently set a plan to break itself up in order to boost shareholder value. The company, which went on a spending spree to build its cable assets, is now withering under a heavy debt load.

In a separate statement, AT&T declared a dividend of 3.75 cents a share. The previous quarterly dividend was 22 cents a share. When companies cut dividends, it is usually a sign that a company needs cash.

The dividend cut was the first in AT&T's history. The cut, which is part of a restructuring move, means that investors will get a much smaller check from Ma Bell. >