Market Hits BT Hard
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BT, which has consistently outperformed the market for the past three years, saw its share price plummet by 20 per cent on Wednesday morning after announcing worse than expected nine months results.
Although BT's turnover rose from £13.3 billion ($21.5 billion) to £15.9 billion ($25.8 billion) in the nine months to the end of December 1999, profits before tax were down by a third to £2.3 billion ($3.7 billion).
However, what caught the market's attention was the mention of job losses in a new voluntary redundancy scheme that will sweep away fully 10 per cent of managers, around 3,000 people.
BT stated that the cost of persuading people to leave the company would be £350 million ($567 million), including incremental pension benefits.
"The results also reflect the costs of meeting increased customer demand and of growing new areas of business," said Vallance, pointing to the launch of the Concert global venture with AT&T in January, and the acquisition of the whole of BT Cellnet last November.
Nonetheless, the steep drop in BT's share price has sent shockwaves through the industry. BT has become one of the major players among the world's Internet businesses and a drop in capitalization of £16 billion ($26 billion), even if temporary, cannot bolster confidence.
Despite the bad news for BT, there were many potential profit centers within its results which showed positive growth. Turnover in Yellow Pages and other directories rose by 60 per cent on the quarter, BT Cellnet added 1.0 million customers, while BT's share of its ventures' turnover grew to £1.9 billion ($3 billion) in the nine months.
The outlook for BT remains mixed, with profits sliding in the fixed network call market in the U.K., but with highly promising new ventures around the globe.
BT said it anticipated that Concert, with its IP backbone network spanning 21 cities in 17 countries, would generate turnover of more than $7 billion in its first year.
By lunchtime Wednesday, BT shares were beginning to recover slightly as investors considered the whole picture.