AT&T

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did little Monday to break through the gloom that has settled over the nation's top phone and cable provider.

The company said Monday it expects sales to continue to flatten in 2001, except at its relatively healthy

wireless unit. AT&T also

forecast lower-than-expected first-quarter earnings. AT&T shares slipped a quarter to $23.06.

AT&T says a coming restructuring, in which it will break into four parts, prevents it from forecasting full-year sales and earnings. But for the first quarter, the company cut its earnings target to 17 to 20 cents a share, from the 23 cents analysts had been expecting.

The message on AT&T's conference call with analysts was that because of steep price declines, the company's heretofore healthier business long-distance service won't help bail out its rapidly slipping consumer long-distance business.

Indeed, investors who had already priced in the shriveling of AT&T's consumer long-distance business were treated to the revelation that business customers were demanding deeper-than-expected discounts on service contracts. As a result, AT&T says that 2001 business-services revenue will be roughly even with 2000's $28.4 billion, while profit margins will plunge 7 percentage points, to 16%.

And don't look to AT&T's cable business to offset any slide. The company is downshifting gears in its TV, cable modem and phone-over-cable department, saying it will "run with the scale" it has now, meaning an emphasis on more business from current markets and less of a push into new markets.

Conserving cash and reducing its $65 billion debt is putting AT&T's cable expansion on the backburner, say some investors.

"The fact that you don't see a wider rollout by AT&T Broadband has a lot to do with capital constraints," says hedge fund manager Michael Kaufman of

K Capital Parnters

. "They have too much debt, and the business services division is not picking up the load. There only option is to start to cut back on capital expenses." Kaufman has no position in AT&T.

AT&T says squeezing more business out of its current cable network footprint will help boost Broadband's 2001 revenue by 15%. With its foot off the pedal, the company expects to add 3 million new customers. Though this targets a 25% gain, the forecast points to a sharp slowdown from 2000's doubling of customer growth. The move struck some analysts as odd, coming as it does just as cable modem growth was starting to pull away from growth in the competing digital subscriber line technology.

Regarding capital spending, AT&T repeated previous comments that it would spend about the same or possibly less this year than the $14.5 billion it spent in 2000.

AT&T tops a list of equipment buyers that have

forecast a clampdown on spending this year. That trend cast a widespread gloom over networking companies including

Nortel

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(NT)

,

Cisco

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,

Corning

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and

JDS Uniphase

(JDSU)

, which only

recently started to feel the pullback in demand.

Also, AT&T said its projected tax rate will jump to a staggering 50% from 38% last year. The tax hit is due to the consolidation of

Exite@Home

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and charges associated with nondeductible goodwill allowances from cable deals.

In a somewhat related development, Richard Roscitt, formerly head of AT&T's business services unit, said Monday that he was taking the top job at network equipment maker

ADC Telecom

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. Roscitt, who built the division, was among a few in line to one day replace Chairman and CEO C. Michael Armstrong.