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Johnson Could Change Focus at GTE

December 11, 1987

James Johnson, who has been named to succeed Theodore Brophy as chairman and chief executive of GTE Corp., is a 38-year veteran of the telephone industry who may make his mark by strengthening GTE's non-phone businesses.

Industry analysts say Johnson, 60, is unlikely to deviate greatly from the "back to basics" approach that Brophy has championed for the past several years.

Like Brophy, who retires next April, they expect Johnson to continue to focus on telecommunications, which yields 90% of GTE's pretax profits.

But the straight-talking Texan, who goes by the nickname "Rocky," could surprise those who expect him to stick to the business he knows best and ignore GTE's other key sectors, which include lighting products and government systems.

Optimistic About Prospects

"I don't think he'll be afraid to stray from the straight and narrow," said Paine Webber analyst Jack Grubman. "If he sees a good opportunity to expand the lighting or government businesses, he will."

While GTE's earnings have fallen sharply this year--mainly a result of continued losses at US Sprint Communications Co., the long-distance company it owns jointly with United Telecommunications Inc.--Johnson is optimistic about the company's prospects.

"GTE is the strongest it's been in a number of years," Johnson said.

Yet Johnson said he will not be satisfied until GTE can boost the quality of its local and long-distance phone services, and perhaps its profits, too. "We're always looking for greater profitability," he said.

Began as a Clerk

Johnson's roots are in GTE's local phone companies, which together are roughly the size of each of the seven "Baby Bells" spun off from AT&T in 1984.

He joined GTE in 1949 as an accounting clerk, worked in dozens of jobs around the country and was named president of the telephone group in 1983. He was elected president and chief operating officer of the parent corporation in 1986.

With GTE's decision to re-emphasize telecommunications, Johnson had been the leading candidate to succeed Brophy, an urbane, Harvard-educated lawyer who joined GTE as general counsel in 1958 and moved into the chairman's office in 1976.

Johnson "comes out of the portion of (GTE) that has always made decent money," said analyst Robert Morris of Prudential-Bache Securities in San Francisco. "The telephone companies have paid for GTE's less than successful efforts elsewhere."

Those efforts include costly forays into the phone equipment, consumer electronics and long-distance markets.

While Brophy has cut much of GTE's losses in those areas, he will leave Johnson with the company's toughest problem--US Sprint, which has not made money since GTE bought the carrier in 1983.

"Johnson's No. 1 priority will be to figure out if there is really a viable future" for US Sprint, said Shearson Lehman Bros. analyst John Bain.

Johnson said US Sprint was on schedule to meet its goal of breaking into the black by the end of 1988 or early 1989.

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