AT&T Broadband puts brakes on gear deliveries

AT&T's cable network operator has notified its network equipment vendors that it will not accept shipments for the remainder of the quarter, a move experts describe as a signal to Wall Street that the company is serious about controlling costs.

AT&T Broadband "wants to be sure that its capital budget and spending line up at the end of the year," according to a company spokesman. He added that the company has enough equipment in stock to proceed with existing network build-out plans, and customers will not be affected.

While it is not clear how many equipment vendors are being turned away, several say fourth-quarter revenue will be affected.

Antec, which supplies AT&T Broadband with voice over cable network equipment, may be the most significantly hurt, although not from a quarterly earnings perspective. AT&T Broadband is Antec's largest customer. The company's stock took a dive last week when Antec announced AT&T Broadband's plans. However, the company says year-end revenue projections will be met due to previous sales.

Harmonic, Com21 and Scientific Atlanta expect fourth-quarter revenue to be about 2% lower based on lower-than-expected sales to AT&T Broadband.

While other cable service providers have occasionally stopped accepting shipments from equipment vendors toward the end of a quarter, most don't make public announcements about such actions, says Mike Paxton, senior analyst at Cahners In-Stat Group.

"I wouldn't call this a [public relations] ploy, but the public nature of the event may be a real message for Wall Street and the investment community," he says.

AT&T Broadband did not issue a press release announcing that it would stop accepting shipments, but it did notify its vendors. Several vendors put out releases briefly explaining how AT&T's decision will impact quarterly earnings. There are likely several other vendors impacted, but they have not issued press releases.

The intended message for Wall Street is that AT&T Broadband will cut costs when necessary and not overspend, Paxton says.

The company has good reason to be concerned about such messages. When AT&T last month announced its restructuring plans, the company stated its intention to spin off AT&T Broadband with an initial public offering next year. AT&T has been criticized for first spending too much for its cable properties and then not signing up enough new customers, especially in the cable telephony arena. "The company is healthy," Paxton says, but needs to boost profits.

AT&T Broadband expects to resume accepting network equipment shipments in January, a spokesman says.

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