AT&T; Takes the Cellular Lead : Deal With McCaw Proves It Is a Dinosaur Reborn
It was only a few years ago that American Telephone & Telegraph Co. was viewed as the quintessential corporate dinosaur, too big and too slow and too stuck in the past to cope with the frenetic whirl of contemporary high technology.
But with its announcement Monday of a plan to acquire McCaw Communications for $12.6 billion in stock, AT&T; provided the clearest evidence yet that if it is a dinosaur, it is the “Jurassic Park” variety: big, yes, but also strong, smart and fleet of foot, able to cooperate when necessary, yet always master of its domain and, most of all, reborn.
Alone among the world’s technology powerhouses, AT&T; now has a major position in virtually every promising segment of the computer and communications industries, as both an equipment supplier and a service provider. It shows every sign of having truly overhauled its corporate culture so that it can behave as an entrepreneur even as it still enjoys the benefits that only size can bring.
“AT&T; has shown remarkable foresight, taking entrepreneurs into its business to help it evolve from a utility into a competitive high-tech company,” said Berge Avazian, an analyst with the Yankee Group in Boston.
The central pieces, of course, are the two huge businesses that AT&T; retained following the 1984 breakup of the Bell system: a ubiquitous long-distance telephone network and a communications equipment operation providing everything from huge network switches to simple consumer telephones.
At the time of the breakup, both those operations faced stiff competition, and it was all that the staid, bureaucratic AT&T; could do to hold its own in the market, let alone get into new businesses. The company did a good job defending its turf in long-distance--and thus kept the profits flowing--but it lost billions in equipment. Early forays into computers, supposedly a big opportunity, were disastrous.
But by the late 1980s, AT&T; had begun to get its act together, cutting the payroll and developing a true marketing capability. The improvements accelerated after Robert Allen took over as chairman and CEO in 1988. By 1991, the company was ready for a bold move: an unfriendly takeover of computer maker NCR Corp. That acquisition is now regarded by analysts as a solid success.
Over the last 18 months, as words like interactive and multimedia and digital technology have become familiar even to laymen, AT&T; has been everywhere. The company bought into 3DO Co., the high-profile start-up that hopes to establish a standard for home multimedia systems. It purchased a minority interest in Sierra Network, which offers on-line video games.
Seeing a grand opportunity in newfangled “personal communicators,” AT&T; bought a stake in General Magic Inc., which is making personal communicator software; acquired an interest in Eo Inc., a communicator manufacturer, and just last week bought control of Eo’s software partner, Go Corp.
And now, with the acquisition of McCaw, AT&T; is set to provide the wireless communications services that will make these new devices useful. AT&T; can now make the computer chips that power the new devices, manufacture and sell the devices themselves, provide the equipment for the networks that will be needed to carry wireless messages and information services and new multimedia programs, and sell the network services.
“Clearly, AT&T; executives believe in the convergence of computers and communications and consumer electronics,” said James F. Moore, a management consultant with Geopartners Research in Cambridge, Mass. “They will be involved in structuring this future in very important ways.”
Whether all this is a good thing or not remains an open question. Respected computer industry pundit Esther Dyson says it is essential that somebody step up and make the enormous infrastructure investments that will be necessary for digital technologies to fulfill their potential.
“I’m glad they’re doing it, and not being so lily-livered as most people,” she says.
But Dyson adds that regulatory changes, such as allowing the cable TV companies to compete in the phone business, will be needed to maintain robust competition.
“Some of us remember when AT&T; was considered a monopolist,” she says. And of course that points to the sweet irony of AT&T;’s current position: Only by being forcibly dismembered was it able to make the changes that have made it so successful today.
AT&T; executives used to gaze longingly from their old headquarters tower in New York City to the IBM building across the street, wishing they could trade market positions with Big Blue.
There’s no doubt who would trade with whom now.
Times staff writer Carla Lazzareschi contributed to this report from Los Angeles.
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AT&T; Reaches Out Again
Since buying computer manufacturer NCR Corp. in 1991 for $7.5 billion, the long-distance giant has moved to extend its telecommunications reach even further by buying other businesses. Just this year, AT&T; has:
* Acquired a controlling stake in Eo Inc. and Go Corp., developers of “personal communicator” technologies. * Acquired 20% of Sierra Network, an on-line video game service, for $5 million. * Acquired a minority interest in General Magic, developer of software for personal communicators. * Acquired a minority stake in 3DO Co., developer of a new multimedia home entertainment system. * Formed an alliance with Viacom for trial of interactive television services. * Agreed to acquire McCaw Communications, a leading cellular vendor, for $12.6 billion. * Reportedly held wide-ranging alliance discussions with cable operator Tele-Communications Inc. and Apple Computer.
