Qwest Cuts Earnings Projection, 7,000 JobsQwest Cuts Earnings Projection, 7,000 Jobs

Some economists are beginning to see signs that the worst of the recession may be over, but their optimism hasn't lifted the outlook for telecom carrier Qwest Communications International Inc., which Thursday reduced its expected-earnings picture below analysts' projections through the end of next year.

Qwest dropped its revenue projection for the fourth quarter, ending Dec. 31, to $4.80 billion, about $270 million less than the $5.07 billion analysts had expected. Qwest says it expects earnings in the period to be $1.70 billion, before interest, taxes, depreciation, and amortization.

Qwest also says it expects full-year 2001 revenue of $19.80 billion, about $500 million less than the $20.30 billion analysts had expected. Earnings for the full year should be about $7.45 billion, before interest, taxes, depreciation, and amortization. For 2002, the company expects revenue in the $19.40 billion to $19.80 billion range, down from analysts' projections of $21.10 billion.

The company says it cut earnings and profit expectations in light of ongoing softness in the market for its services. It will cut another 7,000 jobs, reducing its workforce from 62,000 to 55,000 by the middle of next year. Qwest also will cut its planned capital expenditures for 2002 from $5.50 billion to between $4.20 billion and $4.30 billion.

"The biggest surprise is the size of this cut, which is more than I would have expected from Qwest," says Counse Broders, principal Internet services analyst at Current Analysis Inc. The job and spending reductions show that even telecom carriers with large, steady revenue streams from local phone customers are hurting in the current economic environment, Broders says.

In Qwest's case, says Broders, the company is experiencing slower-than-expected growth because some business customers are delaying orders for new phone and Internet lines, while other companies are going out of business.