Sprint hurt by rivals: Wells Fargo profit increases

Tuesday, April 17, 2001 | 11:11 a.m.

SUN STAFF AND WIRE WIRE REPORTS

Sprint Corp., the dominant local phone company in Las Vegas, today posted weaker-than-expected first-quarter results for its long-distance and wireless businesses as the company continues to slash prices in the face of stiff competition.

Sprint stock was off 4 percent this morning to $22.44 on the news.

Separately, Wells Fargo & Co., the largest bank in Nevada, today said its quarterly earnings jumped 11.5 percent.

Sprint, the nation's No. 3 long-distance carrier and based in the Kansas City, Mo., area, said net income in the period plunged 72 percent to $315 million, or 36 cents a basic share, from $1.12 billion, or $1.25 a share, a year earlier.

Excluding an investment gain of a penny a share, Sprint earned 35 cents a share. Analysts had expected earnings, excluding items, of 37 cents a share, according to Thomson Financial/First Call.

The year-earlier results were inflated by a gain of $675 million, or 75 cents a share, from the sale of Sprint's investment in the Global One joint venture, as well as a 2 cents a share gain from investments. Excluding these items, Sprint earned $445 million, or 48 cents a share, a year earlier.

Revenue in the latest period was virtually flat at $4.36 billion, compared with $4.40 billion a year earlier. Voice revenue fell 2 percent, even as long-distance calling volume rose 21 percent.

While Sprint continues to see revenue declines in its voice long-distance business, the company said sales in some other units, including local phone and data, were up for the quarter.

Data revenue grew 6 percent, but growth was damped somewhat by capacity limitations and the slowing U.S. economy.

Revenue at its local telecommunications unit, including the Las Vegas metro area, rose 4 percent to $1.55 billion as more customers signed up for bundled services. Local operating income rose 4 percent to $438 million while operating cash flows in the division increased 3 percent to $719 million.

Revenue from Sprint's product-distribution and directory-publishing business increased 7 percent.

Its global-markets unit posted a 2 percent decline in revenue, however, due to lower long-distance voice revenues and reduced sales of network-management services and customer premise equipment. Those declines were partially offset by growth in Internet protocol and data services.

Sprint is facing increasing competition in the long-distance arena from a slew of companies, including the Baby Bells, which have received permission to carry long-distance calls. The competition has led the company to slash prices, putting pressure on what was once a profitable business for Sprint.

In February, Sprint warned analysts to expect 2001 earnings on the low end of previous forecasts of $1.65 to $1.75 a share. At the time, analysts had been expecting 2001 earnings of $1.66 a share, according to First Call.

The wireless phone operation Sprint PCS, which trades as a tracking stock, also fell short of analysts' expectations. Sprint PCS posted a net loss of $391 million, or 40 cents a basic share, compared with a net loss of $513 million, or 54 cents a share, a year earlier.

Analysts had expected a loss of 37 cents a share, according to First Call.

The latest results included a nonrecurring gain of $2 million a share, while the year-earlier results included a nonrecurring charge of $3 million and a gain of $18 million, or two cents a share, on the sale of customers and network infrastructure to a PCS affiliate. The company didn't say what Sprint PCS's results would have been excluding the items.

Revenue in the latest quarter jumped 68 percent to $2.05 billion from $1.22 billion a year earlier. Sprint said its PCS business-customer base rose 73 percent from a year earlier on the strength of its Sprint PCS Wireless Web service.

Wells Fargo

San Francisco-based Wells Fargo today said net income totaled $1.16 billion, or 67 cents a share, up from $1.04 billion, or 61 cents a share, a year earlier. The latest results matched the mean estimate from a First Call survey.

The bank saw a sharp decline in venture capital gains in the quarter to $17 million from $885 million a year earlier.

Net interest income -- a measure of profit from lending -- was $2.83 billion, up 7 percent from $2.65 billion in the 2000 quarter. Noninterest income, which includes fees, was $2.41 billion, an increase of 18 percent from $2.04 billion a year earlier.

The bank raised its loan-loss provision to $361 million from $276 million.

Despite the earnings improvement, Wells Fargo stock was down $1.72 this morning amid weakness in regional bank stocks.