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AT&T's Q3 a Real Puzzler

Shares in AT&T Corp. (NYSE: T) took a pounding Tuesday morning as the long-distance carrier revealed an accounting problem that overshadowed its improved third-quarter earnings (see AT&T Posts Q3 Earnings).

The stock fell 6.7 percent to $19.77 a share by midday after AT&T revealed it fired two employees in September this year for improperly accounting for expenses. AT&T said the employees manually overrode internal accounting procedures, causing the company to understate access and connection expenses by $125 million in 2001 and 2002.

It’s not clear yet exactly which numbers were manipulated, but analysts were wary of attaching too much weight to the disclosure. "The earnings weren’t bad enough to justify this kind of sell-off... but investors are very jumpy about any kind of accounting malfeasance," said Kevin Calabrese, analyst at Argus Research.

AT&T said it has kept the Securities and Exchange Commission (SEC) informed of this problem as it was uncovered and is not expecting an additional investigation.

How did the rest of AT&T's quarter shape up? To find out, read the full story on our sister site, Boardwatch. — Jo Maitland, Senior Editor, Boardwatch

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