July 12, 2001, 11:41PM
Broadband trims down at Enron 
But quarter's profits increase 40 percent 
By MICHAEL DAVIS 
Copyright 2001 Houston Chronicle 
Enron Corp. will continue to scale back its money-losing broadband business, shifting personnel back into its high-growth energy segments, the company said Thursday. 
It will be the second time in four months that Enron has scaled back its broadband business. The company disclosed its intentions as part of its second-quarter results, which included a 40 percent rise in net income. 
Enron officials still expect the company's broadband business to be a core segment for the company but it has yet to deliver the sort of growth they once envisioned. A deal with Blockbuster that fell through earlier this year was considered a major setback. 
Enron's broadband business reported a $102 million operating loss, compared with an $8 million operating loss for the same quarter a year ago. 
Enron said it would significantly reduce spending in its broadband unit "to match the reduced revenue opportunities currently available." 
Analysts were not surprised by the company's move to reduce its exposure to the broadband market in the near term. 
"This is just a recognition of reality, not just with them but in general," said Daniel Tulis, energy analyst with Bank of America Securities in New York. "This has been a business that has taken a lot longer to materialize and it has affected everybody. It's just been total devastation in the industry across the board." 
In April, Enron Broadband Services eliminated up to 250 positions to reflect a softening broadband market. This latest cost reduction will result in more jobs being shifted from the broadband unit's 900-person work force into Enron's energy business, said Jeffrey Skilling, Enron's chief executive officer. 
"We just need to get the burn rate down, so we are going to redeploy people," Skilling said. 
Skilling said he remains "absolutely convinced" that broadband is going to be an enormous market for Enron one day but said the company has to adjust to the bandwidth glut the market is experiencing. 
Overall, the Houston company had second-quarter net income of $404 million, or 45 cents per share, on revenues of $50 billion. That compared with net income of $289 million, or 34 cents per share, on revenues of $16.8 billion in the second quarter of 2000. 
The company topped Wall Street's expectations slightly. Analysts had expected the company to earn 42 cents per share in the quarter, according to estimates compiled by Thomson Financial/First Call in Boston. 
Enron told investors that it is now confident it will achieve earnings per share for the year of $1.80, and the company said it expects to earn $2.15 per share in 2002. 
The 2002 estimate is up about 20 percent from what most analysts were projecting for next year. 
Shares closed Thursday at $49.55, up 45 cents. 
Enron's wholesale services business, which includes energy sales and trading, has consistently led the company in growth and operating income. In the second quarter, it had operating income of $802 million, up 93 percent compared with the $415 million it earned in the second quarter 2000. 
The standout for the quarter in this division was Enron's European operations, which showed a 103 percent increase in natural gas volumes and a 463 percent increase in power volumes. 
Enron's retail energy services division had operating income of $60 million in the second quarter compared with $46 million in the previous year's second quarter. In the second quarter, $7.2 billion of new contracts were completed, the company said. 
Enron's transportation and distribution business, which includes its natural gas pipelines and its Portland General electric utility, had operating income of $77 million, which was exactly the amount it earned in the comparable quarter last year. 
_______________________
Rebecca Watkins
Enron Broadband Services
713-853-5605 (office)
713-302-9370 (mobile)
713-646-5745 (fax)
rebecca_watkins@enron.net

----- Forwarded by Rebecca Watkins/Enron Communications on 07/13/01 09:12 AM -----


	Katherine Harper 07/13/01 08:54 AM 	   To: Rebecca Watkins/Enron Communications@Enron Communications  cc:   Subject: 	


http://www.chron.com/cs/CDA/story.hts/business/966942


Katherine Harper
Administrative Assistant II
Enron Broadband Services
Office 713-853-5481
Fax     713-646-5745
Cell     713-562-4968
katherine_harper@enron.net