ONE WAY OR ANOTHER, AT&T WILL ROCK WALL STREET TODAY.
THE COMPANY IS EXPECTED TO ANNOUNCE A DRAMATIC CHANGE IN STRATEGY - ONE THAT COULD LEAD EVENTUALLY TO A FULL-SCALE BREAKUP - AFTER KEY BROAD MEETINGS ON MONDAY AND TUESDAY.
A LAST-MINUTE FAILURE TO ANNOUNCE SOMETHING BIG, AS FINANCIAL ANALYSTS MEET TO HEAR THE COMPANY'S LATEST EARNINGS REPORT TODAY, COULD LEAD TO A ROUT.
WHILE AT&T WON'T EVEN CONFIRM THE MEETINGS TOOK PLACE, DIRECTORS APPEARED READY TUESDAY TO APPROVE STEPS THAT COULD LEAD TO A MASSIVE SPLIT.
THE STEPS BEING CONSIDERED INCLUDED NEW TRACKING STOCKS OR OUTRIGHT SPINOFFS.
SUCH A PLAN WOULD ESSENTIALLY REPUDIATE CHIEF EXECUTIVE C. MICHAEL ARMSTRONG'S BRASH VISION FOR THE COMPANY.
SINCE TAKING OVER IN 1997, THE FORMER IBM AND HUGHES ELECTRONICS EXECUTIVE HAS TRIED TO TURN THE LONG-DISTANCE COMPANY INTO A DIVERSIFIED, FULL-SERVICE PHONE, CABLE AND INTERNET POWER.
HE WANTED ALL THESE BUSINESSES UNDER ONE ROOF SO HE COULD TAKE ON SOME NEW COMPETITORS, PARTICULARY FORMER REGIONAL BELL PHONE COMPANIES, THAT ARE QUICKLY MOVING IN ON AT&T'S LONG-DISTANCE TURF.
BUT A SERIES OF SETBACKS CUT WALL STREET CONFIDENCE THAT AT&T COULD ACCOMPLISH THE TRANSFORMATION, AND ITS STOCK FELL NEARLY 40% IN THE PAST 12 MONTHS.
NOW INVESTORS, AND CONSUMERS, WILL WANT ANY PLAN TO ANSWER:
>WHAT HAPPENS TO AT&T'S PROMISE TO OFFER ONE-STOP SHOPPING AND BARGAIN PRICES FOR PACKAGES OF LOCAL, LONG-DISTANCE AND WIRELESS PHONE SERVICES ALONG WITH CABLE TV AND HIGH-SPEED INTERNET ?
>DOES THE MOVE FUNDAMENTALLY CHANGE AT&T'S BUSINESS - OR DOES IT MERELY SERVE TO DRAW ATTENTION AWAY FROM THE VEXING PROBLEMS THE COMPANY HAS ENCOUNTERED ?
THE BREAKUP RATIONALE IS SIMPLE: AT&T BELIEVES ITS SHARES ARE WAY UNDERVALUED AT TUESDAY'S CLOSING PIICE OF $27.19, DOWN 44 CENTS, AND LESS THAN HALF ITS PRICE AS RECENTLY AS LATE MARCH.
A SPLIT COULD LEAD INVESTORS TO REALIZE THAT AT&T IS WORTH MORE BECAUSE THEY'D HAVE TO PUT A VALUE ON ITS DIFFERENT PARTS.
THEY COULDN'T WRITE THE COMPANY OFF AS AN OLD-FASHIONED, AND STRUGGLING, LONG-DISTANCE PROVIDER.
WHATS MORE, THE UNITS MIGHT BECOME MORE NIMBLE AND CREATIVE WHEN DIVORCED FROM AT&T'S STARCHY BUREAUCRACY.
"WITH THE MARKET JUDGING THEIR PERFORMANCE EVERY DAY, THERE WOULD BE MORE INCENTIVE FOR THOSE INDIVIDUAL BUSINESS UNITS TO PERFORM AS EXPECTED," SAYS MEL MARTEN OF EDWARD JONES.
NEVERTHELESS, SOME SAY THE PROPOSED BREAKUP WOULD BE A STUNNING, BUT NOT NECESSARILY WISE, RETREAT FROM AT&T'S STRATEGY TO BUNDLE LOCAL, LONG-DISTANCE, INTERNET, CABLE AND WIRELESS SERVICES.
"THEY'VE SPENT TWO YEARS DRILLING IT INTO OUR HEADS THAT WE NEED ONE-STOP SHOPPING, AND NOW THEY'RE SHOOTING THEMSELVES IN THE FOOT," TELECOMMUNICATIONS ANALYST JEFF KAGAN SAYS.
ALTHOUGH THE BROADBAND COMPANY COULD PACKAGE TV, INTERNET AND LOCAL PHONE SERVICES, THEN STRIKE MARKETING DEALS WITH THE NEW LONG-DISTANCE AND WIRELESS FIRMS, THEY MIGHT NOT DO IT WITH THE SAME GUSTO YOU'D EXPECT FROM A SINGLE COMPANY.
"NOW YOU HAVE TO FORM ALLIANCES, AND THAT'S NEVER EASY," KAGAN SAYS.
AND A SPLIT COULD ALSO TURN THE NEW UNITS INTO TAKE-OVER TARGETS, FORESHADOWING THE EVENTUAL DEMISE OF A BIG CHUNK OF AT&T.
"THEY COULD BE GOBBLED UP BY OTHER PLAYERS," KAGAN SAYS.
"WE COULD BE WITNESSING THE DISMANTLING OF AT&T."
CONSUMER ADVOCATES FEAR A BREAKUP MIGHT RESULT IN LESS COMPETITION AND HIGHER PRICES.
"THEY"RE EFFECTIVELY ORPHANING AT&T'S CORE LONG-DISTANCE BUSINESS AND HANDING IT OVER TO THE LOCAL TELEPHONE COMPANIES," SAYS GENE KIMMELMAN OF CONSUMERS UNION.
HE ADDS THAT AT&T COULD ALSO TIE AN ANCHOR TO THE LONG-DISTANCE UNIT - AND MAKE THE OTHER OPERATIONS LOOK BETTER -BY LOADING IT WITH MUCH OF THE COMPANY'S $57 BILLION IN DEBT.
IN ANY CASE, IT MIGHT BE HARD FOR THE BROADBAND COMPANY TO SPEND BILLIONS BUILDING IT'S CABLE-BASED LOCAL PHONE NETWORK IF IT IS CUT OFF FROM MASSIVE INFUSIONS FROM THE CASH-GENERATING LONG-DISTANCE ARM.
"IT DOSN'T MATTER HOW YOU SLICE THE BALONEY, IT'S STILL BALONEY," SAYS DONALD LUSKIN CHIEF OF MATAMARKETS A WEB-BASED MUTUAL FUND.
"YOU CANT SHRINK YOUR WAY TO GREATNESS."