Long-distance telephone and cable-television giant AT&T Corp. on Monday posted a 92-percent drop in second-quarter profits amid stiff competition and weak prices in the long-distance telephone market, and warned third-quarter revenues may fall. 

AT&T, which is splitting into four separately traded companies, said second-quarter profits excluding the one-time items dropped to 4 cents a share from 47 cents a year earlier. 

Wall Street analysts had expected New York-based AT&T to post earnings of 3 cents a share, according to research firm Thomson Financial/First Call. 

Excluding AT&T Wireless, which became an independent company on July 9, AT&T posted a loss of $191 million, or 10 cents a share, compared with a profit of $1.75 billion, or 49 cents a share a year ago. Including a gain in the wireless business, AT&T had a loss of 5 cents a share. 

Revenues from continuing operations fell 3 percent, to $13.33 billion. On a pro forma basis, adjusted for last year's acquisition of MediaOne Group and other items, quarterly revenues fell 5.9 percent from the year-ago quarter. 

AT&T, the No. 1 U.S. long-distance telephone and cable television company, said a continued decline in long-distance voice revenue offset improvements in its AT&T Broadband cable-TV unit, and higher sales of data and Internet services to businesses. 

Shares of AT&T have fallen about 22 percent since it announced its restructuring in October, outperforming the North American Telecommunications Index by about 6 percent, and outpacing its closest rival, WorldCom Inc., by about 51 percent. AT&T's stock closed Monday at $20.05 on the New York Stock Exchange. 

``Revenue indeed was below our expectations,'' said AT&T Chairman C. Michael Armstrong. ``While our total revenue reflects the impact of the industry-wide decline in long distance voice, we are growing revenue in Business data and IP (Internet protocol) services and our Broadband business by nearly 14 percent.'' 

``Later this year, AT&T Business will, for the first time, reach a crossover point where revenue from growth services will exceed long distance voice revenue, and we are well on our way to full-year revenue growth in the mid-teens in AT&T Broadband,'' the company said. 

THIRD-QUARTER REVENUES TO FALL 

AT&T said it expects its third-quarter earnings from continuing operations, excluding other income, to be in the range of 2 cents to 5 cents a share. Wall Street analysts had expected the company to earn 6 cents a share in the third quarter, according to First Call. 

AT&T expects third-quarter pro forma revenues to fall at a rate similar to the 5.9-percent drop in the second-quarter. Revenues could drop even more sharply if the U.S. economy continues to soften. AT&T has not provided full-year guidance for overall company due to its restructuring. 

``The revenue shortfall and the forward-looking statements both indicated continued weakness. There was more weakness than expected in long distance, which was bad already. So, that means it's really, really bad,'' said Debra McNeill, a portfolio manager with the $125 million Fremont Growth Fund, which owns about 30,000 shares of AT&T. 

Following the recent separation of the wireless business, AT&T plans to split its other major units -- business, consumer, and broadband -- into separately traded stocks. AT&T said it pared its debt load to $39.5 billion, down from about $56 billion at the start of the year. 

``While they were a little light on the revenue side, they definitely made it up on expense side. Cost-controls were better than expected and they are doing a great job reducing their debt. But I still think they will be disappointed in the morning (by the stock market reaction),'' McNeill said. 

BREAKING UP IS HARD TO DO 

Revenues in AT&T Business fell 1.8 percent, to $7.09 billion. It warned that its decision to exit several unprofitable contracts and weakness in wholesale capacity sales may hurt AT&T Business' full-year 2001 revenue growth rate by up to two percentage points. The unit's revenue growth also may be hurt by weakness in the U.S. economy. 

``No doubt everybody is getting hurt by the economy. Data growth was OK, not great. It could be better. My hope is that we've reached the bottom in terms of declines. I just want to know if the bleeding has stopped,'' said Patrick Comack, an analyst with Guzman & Co. 

AT&T Consumer's revenues fell 23.7 percent, to $3.79 billion, due to technology substitution of wireless and Internet services, stiff competition, the slowdown in the economy, and continued customer migration to lower-priced products and optional calling plans. 

BROADBAND SHOWS IMPROVEMENTS; OPTIONS WEIGHED 

AT&T Broadband's revenues rose 49.5 percent, to $2.57 billion. At the end of the quarter, AT&T Broadband had 848,000 broadband telephony customers, 1.3 million high-speed data customers, and 3.1 million digital video customers. 

AT&T on Wednesday rejected Comcast Corp.'s unsolicited bid to purchase its AT&T Broadband unit, calling the $40 billion stock too low. AT&T said it would explore financial and strategic alternatives for AT&T Broadband, including its previously announced plan to spin off the cable unit. 

``I think the Broadband numbers showed excellent improvement in profitability. They're still below the rest of the cable industry, but at least they can say 'We've made some progress.' They needed to post a dramatic improvement in margins in light of Comcast bid in order to substantiate their rejection of that offer,'' Comack said. 

The broadband unit's cash-flow margins, excluding other income and restructuring charges, increased 5.1 percentage points to 23.4 percent. Comcast, which boasts profit margins of 41 percent, had said it believed it could dramatically improve its larger rival's margins.