Consumer Boom or Bust?

AT&T’s Siegel added the restructuring could lead to opportunities such as new partnerships for the consumer long-distance business. That’s because under the new AT&T structure, the consumer long-distance business can focus on funding itself — not funnelling its revenue to other AT&T units including the wireless and broadband businesses, as is the case under the old AT&T structure.

In fact, the massive AT&T conglomerate with its various business units was one of the key reasons why AT&T decided to split up. On Oct. 25, AT&T confirmed it would dismantle itself into four smaller, publicly traded firms by 2002, so investors can track the growth or decline of each unit instead of trying to value the entire conglomerate. The four new units will be AT&T Wireless, AT&T Broadband, AT&T Business and AT&T Consumer.

The breakup is the third major restructuring for the former national telephone monopoly since 1984’s court-ordered breakup, when AT&T spun off its local calling operations as seven Baby Bells, several of which have since merged.

Wall Street Waiting for Results

Meanwhile, Wall Street is taking a cautious, show-me-more-profits approach to the restructuring news. Many analysts who follow AT&T downgraded the stock after the restructuring change.

“They are going to have to prove that this restructuring is going to put the company on the right track,” said Stanley Nabi, vice chairman at DLJ Asset Management.

Other analysts are more pessimistic. “It’s the surrender to Wall Street, which was foolishly looking for near-term results and stock gains on a five- to 10-year turnaround project,” said Gartner Group analyst Ken McGee.

In 1997, AT&T Chairman C. Michael Armstrong began an overhaul of the company into a one-stop shop for telephone, television and Internet services. It bought two of the nation’s largest cable TV firms, Tele-Communications Inc. and MediaOne Group. Armstrong said the new restructuring is not a repudiation of that hub strategy. The Associated Press and Reuters contributed to this report.

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