SBC Down, Not Out

A lot of folks have SBC Communications (NYSE: SBC  ) (and Verizon (NYSE: VZ  ) and BellSouth (NYSE: BLS  ) , its regional Baby Bell brethren) pegged as losers in the great telecommunications game. Are the naysayers right? SBC Communications' second-quarter figures are out, so let's slip on our rose-tinted glasses for a moment and look at the numbers.

Sure, SBC missed analysts' earnings estimates this quarter. But the shortfall was by and large the result of the strike in May by SBC employees. Ignoring the costs of doing business during a four-day work stoppage, SBC actually beat the estimates by $0.04.

OK, it's hard to ignore SBC's shrinking core phone business. Revenue in that business fell 6.3%. Even so, SBC's top-line growth -- albeit a slim 2% -- shows that SBC's push into fast-growth Internet, wireless, and long-distance services are offsetting those local phone losses.

Indeed, digital subscriber lines (DSLs) are selling like hotcakes. In the second quarter, 315,000 people signed up for SBC's broadband Internet service. That growth is up from Q1 and faster than Comcast's (NYSE: CMCSA  ) most recent broadband cable subscriber growth figures. SBC now has 4.3 million DSL users.

Then there's wireless: Far from being a stake in the Bells' heart, wireless is doing wonders for SBC. Cingular -- the company's joint venture with BellSouth -- added 428,000 net subscribers in Q2 for a total of 25 million. Sales rose 7.3% to $4.2 billion from a year ago.

Amazing as it sounds, long distance could be a big growth opportunity for SBC. Long-distance giant AT&T's (NYSE: T  ) decision to pull out of the residential phone market opens the door for SBC to make big gains by selling more service "bundles" in which customers pay a single price for long-distance, local, and Internet services.

Still convinced that SBC is sunk? Admittedly, competition will continue to be fierce, prompting more price wars and putting loads of pressure on margins. But look on the bright side: SBC is still kicking.

David Gardner recommended SBC Communications forMotley Fool Stock Advisorsubscribers. Subscribe today and receive a six-month, money-back guarantee.

Fool contributor Ben McClure doesn't own shares of any companies mentioned in this article.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 509548, ~/Articles/ArticleHandler.aspx, 10/23/2014 8:41:32 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement