T's Terrible Quarter
February 04, 2012
– Comments (5) |
RELATED TICKERS: T
About 3 months ago I'd picked up some AT+T (T), largely on the strength of its 6% dividend yield. Other things that appealed to me about the company were its relatively low debt-to-equity ratio (40%, compared to VZ's 100+%) and the prospect of a synergistic merger with T-mobile America.
You all know how that worked out. Justice blocked the merger, causing AT+T to have to pay a $4 billion breakup fee. I'm an AT+T shareholder; that's my money. Or it was, before the ill-conceived plan caused AT+T management to lose it.
AT+T added 717,000 subscribers; optimistic analysts were hoping for a figure nearer 2 million. And more than three-quarters of the smartphone activations were iPhones, for which AT+T has to hand over the lion's share of profit to Apple.
They also took a massive writedown on pension investment losses, requiring another billion to be injected to buff up the pension plan. All in one quarter. They had warned on this prior to the report, to be fair.
AT+T is probably not going to go out of business, but I have free leeway to put my money into any publically traded stock; this last quarter, they did not execute the way I like *my* companies to execute. I got out with an overall 1% gain and felt lucky to do so.
The report reminded me of that GM report in 2006 where they reported a 68 billion dollar loss "because of an accounting change." I was a GM shareholder then and remained one until a few weeks before that company reorganized in bankruptcy. My thoughts at that time were similar to the bull case for AT+T now - it's a one-quarter fluke, the dividend is large and safe, there's only one major domestic competitor, the company is a Dog of the Dow and those historically outperform. My thoughts on GM at that time were so catastrophically wrong that whenever I hear an echo of them today, I sell that stock immediately.
I don't know if I'd short AT+T here. I'm not a short-side investor generally and I would be very dubious about holding a short position in T through an ex-div day. But if they cut their dividend, look out below.
In other news, I'm out of PPP (40% gain) and AUQ (about even) in my taxable account, not because I have changed my idea about these companies, but because I need the money for something else. Thanks Sinchiruna!
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