Ding dong. An early evening, preholiday warning from BellSouth (BLS) rings like a bad omen for the other Baby Bells.

The phone business is bad enough these days, so it's understandable if a telco would want to make a few changes to its reported and expected numbers without drawing a lot of attention to its bookkeeping in this scandal-plagued, post-WorldCom climate.

With growth businesses like wireless and fast-line Net access stalling and traditional local phone service drooping heavily, some Wall Streeters are taking BellSouth's earnings cut as a sign of more preannouncements and dismal performances from the likes of

SBC

(SBC)

and

Verizon

(VZ) - Get Verizon Communications Inc. Report

. The stocks, which have already been hit hard in this slowdown-soaked year, hewed to a mostly retreating trend Friday, with Verizon closing flat and SBC and BellSouth each dropping 4%.

Timing Is Everything

Of course, there's also an argument that the bad-business message is the preferable one in this context. The fact that BellSouth lowered its year-end earnings target by 3% Thursday evening, a mere five weeks after the company provided updated financial projections, was itself enough to surprise analysts. But given the timing of the shortfall forecast, just weeks past the midway point in the quarter, some see a disturbing signal that the deterioration of the telecom industry is accelerating -- or a series of discrete confessions in the wake of internal audits.

"It looks like they are trying to dodge the spotlight," says Friedman Billings Ramsey analyst Susan Kalla. "Maybe they are seeing their business deteriorating faster than they expected."

BellSouth spokesman Jeff Battcher disputes the notion that the company has been trying to hide bad news from investors.

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"We try to let our investors know as soon as possible," Battcher says. "If anything, we are going above and beyond in giving out information."

But BellSouth's one-paragraph statement late Thursday offered very little by way of explanation, and there was no accompanying

Securities and Exchange Commission

filing to shed more light on the revisions. Battcher says the company has no plans to file the earnings revision in a form 8-K with the SEC.

In the release, BellSouth blamed a "softness" in its Cingular wireless sales, a wireless-related writedown and an overall sluggish economy for its 2002 profit revision.

The Plan

Curiously, even though at least two of the factors cited seem to have top-line implications, BellSouth didn't tamper with its revenue projections. Battcher says half the earnings weakness came from the Cingular side of the business.

This marks the second oddly timed accounting-based revision in the past two months by the Atlanta-based phone giant.

In July, BellSouth

blamed a redemption of debentures for a $300 million discrepancy in its reported second-quarter cash flow. Interestingly enough, that revelation was also conveyed in a one-paragraph statement issued at 5:30 on a Friday evening. To the company's apparent benefit, the announcement largely went undetected by the media.

Companies have often timed the release of bad news to best manage the effects. But when they go to that move too often, it may help draw unwanted attention.

"If we went out with it on Friday, it would really look like we were trying to hide something," says Battcher.

Investors may want to note that for next time.