60-Year-Old Chairman Knows Tenure Will Be Short : Olson Seeking to Take His Best Shot as Head of AT
James E. Olson, who turns 61 on Dec. 3, knows his time is short as chairman and chief executive of American Telephone & Telegraph. Named to succeed Charles L. Brown, effective last Sept. 1, Olson said during a visit to Los Angeles this week that he doesn’t intend to work beyond age 65.
“So I have four years,” he said.
For the record:
12:00 AM, Nov. 20, 1986 FOR THE RECORD
Los Angeles Times Thursday November 20, 1986 Home Edition Business Part 4 Page 2 Column 6 Financial Desk 1 inches; 31 words Type of Material: Correction
In a story Wednesday about American Telephone & Telegraph, AT&T;'s payroll at the time of divestiture was incorrectly stated. The correct figure was 375,000, since trimmed to 326,000, with further reductions expected.
What he wants to see when it is time to step down, Olson said, is an AT&T; that remains the market leader in long-distance communications and in the sale of network telecommunications equipment--what he calls the company’s “core businesses.”
But he also expects to turn around the sector that has been dragging down company profits since the breakup of the Bell System. That includes the sale of smaller telecommunications equipment (such as switchboards and phone sets) located on a customer’s premises, and computers.
“In the computer business we’re the new kid on the street,” he conceded. On the other hand, he added, “we’ve learned a ton about the computer business.”
The key to AT&T;'s future success, according to Olson’s strategic view, lies in its ability to bring computer products under “the umbrella” of an overriding companywide orientation toward switching and moving all kinds of information all over the world for a broad spectrum of customers.
“We’ve got to find a way to go at that market under a much broader strategy,” he said. “We think we can bring to data networking what we brought to voice networking in the United States and the world: provide a much more cost-effective way for customers to do data networking than they can do today.”
So far, he said, AT&T; controls less than 10% of the rapidly expanding $57-billion data transmission market, and most of that revenue comes simply from selling private lines for use to transport data.
But, Olson acknowledged, in order to implement such a long-term strategy, short-term performance must be improved.
AT&T; earned $1.56 billion last year--or $1.37 a share--on revenue of $34.9 billion. All but a few cents per share of that profit came from AT&T; Communications, which maintains and operates the company’s long-distance network and accounts for nearly half its plant and equipment. For the first nine months of this year, earnings totaled $1.48 billion--up 24.4% due to changes in pension accounting procedures, while revenue remained flat at $25.6 billion.
“I’ve got to improve the profitability of the company by 1990,” he said. “I’ve got to begin that in 1987, and then incrementally move it up so I’m in the earnings range of the 20% returns of the leading companies.”
To begin to do that means paring AT&T;'s huge work force of 326,000, despite its fall from nearly 2.75 million employees at the time of divestiture--almost all of the layoffs coming from the information side of operations.
More Jobs to Be Cut
In its initial job-cutting effort, AT&T; axed 11,000 jobs--6,000 of them from information systems. Last year, information systems took a further 24,000-job hit, and even more jobs will be lost this year as communications and information services are merged--as many as another 25,000, according to some published estimates.
That would still leave a payroll of 300,000 employees.
Layoffs thus are becoming a fact of professional life at AT&T;, as they have at many other giant companies. But lifetime employment had been the operative fact of life for workers weaned under the Bell System, where job security was the norm, much as it once was in government.
Olson, who spent his first two months in seeking to clarify management strategy and to win support for it from his chiefs of staff, this month began meeting with middle managers and rank-and-file employees across the country. He said he is seeking to put the layoffs into perspective and to sway employees toward his optimistic view of the company’s future.
Concern Over Computer Market
“Most of them are still going to be here,” he reasoned. “But AT&T; is going to continue to attack its costs, and we’re dealing with that issue across the board.”
Some analysts have expressed concern that AT&T; may be turning away from the computer market after having been burned in its initial foray. If so, they said, the company would be forgoing the rapidly expanding world of information that it gave up so much to enter free from regulation.
“Some people have misread my comments as if we were getting out of selling individual computers,” Olson said. “We’re not.”
Computers remain important, he explained, but AT&T; intends to “refocus” them as integrating agents in systems designed to transport all kinds of information. Large companies “don’t want to have five or six different data networks--one for payroll, one for inventory control, one for sales,” he said. “We know how to be an integrator.”
Olson is betting his four years at the top that AT&T;'s future lies in building on the foundation of its past century.