AT&T; Likely to Unveil Company Spinoffs Today

AT&T; Corp. is expected to unveil plans today to create four distinct businesses, through tracking stocks and spinoffs, in an effort to jump-start growth and lift its flagging stock price.

The No. 1 U.S. long-distance telephone and cable-television company is expected to create separate businesses for its wireless, consumer long-distance, business services and broadband cable-television units.

AT&T;’s board approved the plan Tuesday evening, according to the Wall Street Journal. Within the next two years, the four major pieces of AT&T; will trade separately with different stock symbols, according to the Journal.

The restructuring announcement is expected today as AT&T; releases a critical third-quarter earnings report that will indicate whether its bold plan to provide telephone and data services over cable-television networks is on track.

AT&T; declined to comment on the expected restructuring.

The company’s shares dropped 75 cents to close at $26.88 on the New York Stock Exchange. The stock has lost about 47% this year.

Over the last few months, AT&T; has weighed several options to boost its stock price and to distinguish its fast-growing data, Internet and broadband cable-television units from its struggling consumer long-distance business.

Today’s restructuring announcement would be the latest dramatic transformation of AT&T.; In 1984, the company broke into eight separate entities, creating the Baby Bells.

AT&T; then spun off its telecommunications equipment-making unit, Lucent Technologies Inc., and computer business, NCR Corp., in 1996.

The breakup proposal sparked criticism from several analysts, who said such a plan would mark a reversal of AT&T;’s strategy to become an “all-distance” communications company that sold packages of local, long-distance, wireless telephone and Internet access services.

“AT&T; has spent the last few years selling us on the idea of being a one-stop shop. And if they do this, they will be turning 180 degrees, setting up separate companies, forcing customers to write separate checks and choose separate providers,” said independent telecommunications analyst Jeffrey Kagan.

“There are two competing interests here--investors and customers. This deal is to appease the investors only and there’s no guarantee that it will work,” Kagan said.

Some investors questioned the logic of AT&T; spinning off the cable television operations it recently spent more than $100 billion to buy. “What a waste of time and money,” said a portfolio manager owning AT&T; stock who declined to be named.

Meanwhile, some executives at rivals said carving up AT&T; would only benefit them. They perceive an opportunity to pounce on AT&T;’s customers if it reshuffles workers, managers and strategic plans.

“Any time you have a large company that radically shifts strategy . . . that is going to put the employee and management structure under stress for a reasonably long period of time--a year or two years. That is only a huge net positive for Qwest,” said Qwest Communications International Inc. Chairman Joe Nacchio.

“Once you separate the company, you forfeit the ability to integrate. Breaking up the company is going to take away any strategic marketing advantages and put management’s eye on internal stuff,” said Nacchio, a former AT&T; executive.

Even by splintering into four entities, AT&T; will have many hurdles ahead, analysts said. It must prove that it is on track with plans to roll out its cable-based telephone service and revive its corporate communications unit.

Analysts estimate the company must have about 350,000 cable telephone customers by the end of the third quarter in order to meet its target to have 400,000 to 500,000 subscribers by year-end.

“Frankly, if AT&T; was performing up to its original forecasts--especially in business services, where revenue growth will be half of what was promised, and in cable, where the telephony ramp was less than expected--T’s [AT&T;] stock would be a lot higher and talk about a restructuring would not exist,” Salomon Smith Barney analyst Jack Grubman said in a recent research report.