Will Armstrong's Strategy Work for AT&T?

ByABC News
October 25, 2000, 3:26 PM

N E W  Y O R K, Oct. 25 -- C. Michael Armstrong likes to tell the story that his granddaughter prayed for him when he left California three years ago to take the helm at the telephoneand cable giant AT&T Corp.

Well God, I guess this is goodbye. Were moving to New Jersey tomorrow, Armstrong often relates the toddler as saying as the family moved east to AT&T headquarters in Basking Ridge, N.J., where he took on one of the most daunting jobs in corporate America.

Now, three years on, with AT&T stock dropping 47 percentthis year and the board breaking the company into four unitsunder a restructuring plan, Chairman and Chief ExecutiveArmstrong might be excused for seeking divine assistancehimself.

The Economist magazine put it bluntly last month: MichaelArmstrong has spent $110 billion on turning AT&T into abroadband-communications powerhouse. But unless he can fix itssagging share price, he may not survive to see his strategythrough.

What Happens to Mike?

Tom Hudson, who manages Lord Abbett Affiliated Fund, whichuntil recently owned AT&T stock, said that there was confusionamong consumers about the telecommunications options on themarket today and that AT&T underestimated the competition.

Mike would be the first to admit that they truly didntunderstand what they were up against, Hudson told Reuters.

The big question is, What happens to Mike? BrianAdamik, president of the Yankee Group technology consultingfirm, said of the restructuring. He may just be thetransitional chairman. My sense is that, at the end, he wouldstep down.

How quickly the tide turned against Armstrong, 62, who just18 months into his reign at the largest U.S. telephone companywas being hailed for turning around the sleeping giant foundedby Alexander Graham Bell 125 years ago.

Stuck in Low Gear

AT&T had been stuck in low gear in the years after thecourt-ordered breakup of the old telephone monopoly, and wasnot responding to, let alone leading, the breathtaking pace ofchange in its industry. Market share was perpetually eroding,and AT&T appeared to have no strategic plan in hand to lead itbeyond long-distance service or to jar it from theslow-to-no-growth rut under longtime Chairman Robert Allen.