AT&T; Reaches Out to Grab a Chunk of Computer Market
After years of asking customers to “reach out and touch someone,” American Telephone & Telegraph Co. is doing some reaching out of its own.
And some grabbing.
Within the last year, AT&T; jumped into the financial services business with the introduction of a calling-cum-credit card that has already attracted 30 million customers and become one of the nation’s most widely held cards.
In the last six months, the company has doubled promotional spending--to nearly $700 million by some estimates--to win back long-distance customers from upstart competitors MCI and U.S. Sprint.
And Sunday, in its most dramatic move yet, AT&T; launched an unsolicited--and apparently unwanted--$6-billion bid to buy NCR Corp., the nation’s fifth-largest computer maker, in a bold effort to bolster its still unfulfilled attempts to become a computer industry power.
“There’s no question that the AT&T; of today is more entrepreneurial,” says Craig Ellis, a telecommunications analyst at C. J. Lawrence Inc. in New York. “The AT&T; of even five years ago wouldn’t have done this. But today, this is a company that is uncertain about its future, and it is doing something about it. It’s called reaching out and grabbing something.”
Indeed, nearly seven years after being deregulated, and then ridiculed and raided as it fumbled for its bearings, AT&T; appears finally to be responding to critics who have wondered when the slumbering giant of long distance would awaken and start throwing its weight around the high-technology industry.
“It took AT&T; a long time to learn that there are people out there who want to kill them. They just didn’t have the instincts to fight,” says William Davidson, a USC professor of business management who specializes in telecommunications.
In fact, analysts note that MCI and U.S. Sprint--until recently-- have had a field day at AT&T;’s expense, winning over long-distance customers and bringing AT&T; into a costly price war.
But, no more. In recent months, AT&T; has started to aggressively fight to defend its turf, outspending its competitors’ marketing budgets by 10 or more times. “They’re bludgeoning the market,” says Robert B. Morris of Goldman Sachs & Co. “It’s bound to have an effect.”
It is.
MCI recently announced that it will lay off about 1,500 workers nationwide because of slumping residential services, and U.S. Sprint has been sputtering for several months. But both continue to spend heavily on consumer advertising and telemarketing. Morris notes that all together, the Big Three are spending more than $2 million a day to promote their services.
The long-awaited evolution of American Telephone & Telegraph from a regulated national monopoly with just one business--long distance--to a hard-charging player in the thick of the hotly competitive data and telecommunications industries hasn’t come easily.
And it is still far from complete.
But more analysts and observers are convinced that the company is serious about making its presence felt, both in its core long-distance business, as well as in limited portions of the computer and financial services operations that rely on and enhance the long-distance business.
“The company is finally getting its act together,” says William Redmond, a former AT&T; employee and now vice president of the network services analysis unit at the Gartner Group in Stamford, Conn.
Still, with annual revenue of about $36 billion and a long-distance market share in excess of 60%, AT&T; is still careful not to stomp its competitors so hard that regulators will increase their hold. In fact, AT&T; is still trying to persuade the Federal Communications Commission to drop the company’s designation as the dominant carrier on the theory that competition is so severe that it no longer deserves the label and the tighter federal regulation that it brings.
But, although the company has been walking a fine line in the long-distance business, its attempts to make a mark in the computer industry have not been constrained by anything other than the company’s own ineptitude, according to several analysts.
Despite efforts to start a business from scratch within its organization and then forge alliances with such computer hot shots as Sun Microsystems and Olivetti, AT&T; has failed so far to cash in on that promise.
“A lot of companies have invested in private computer network services to get what AT&T; could have delivered,” says Douglas Gold, telecommunications research chief at International Data Corp. in Framingham, Mass.
The move on NCR, which supplies an enviable share of the computer and networking needs for the financial services and retail industries, is designed to remedy all this.
“There’s no question that this is a major strategic move for AT&T;,” says Mark Fowler, former FCC chairman and now a Washington lawyer. “This is a move from a 1990s AT&T; that fully knows that it has to be in the computer business as well as the data transmission business, and that it has to be able to integrate the two.”
Cynics--and there are still many who remain unconvinced that AT&T; can make the transformation--argue that the company’s moves into credit cards and computers are defensive maneuvers, designed more to mask sagging long-distance operations than provide strategic new business opportunities.
Noting that the company’s share of the long-distance market has dwindled from 80% at the end of 1984 to about 62% in mid-1990, Ellis of C. J. Lawrence argues that the company’s latest moves are aimed at maintaining earnings growth, not creating structural and strategic alliances.
“AT&T; would like you to believe all that, but it’s all too linear and simple,” Ellis says. “And perhaps they are diversifying too far.”
The Long Distance Market While the long-distance phone market is growing rapidly. . . Long distance use by quarter, in billions of minutes . . .AT&T;’s share of it is declining. AT&T; market share, by quarter in percent On news of the AT&T; offer, NCR’s stock soared while AT&T;’s fell. NCR Stock Monday close: 81 1/2; up $24.75 AT&T; Stock Monday close: 30 1/8; down $2.00Source: Dow Jones
