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AT&T Expects Profits From Its Computer Line by 1990

February 25, 1988|From Reuters

NEW YORK — American Telephone & Telegraph Chairman James E. Olson said the company's computer business will not be profitable until 1990--a year later than AT&T previously forecast.

Last March, Vittorio Cassoni, head of AT&T's computer unit, told securities analysts that the unit would stop losing money by the fourth quarter of 1988. But Olson said the unit would not be profitable until 1990.

"Going into 1990, the business ought to be profitable," he said in an interview.

While the design of its computers and its UNIX operating system received high technical marks, some critics have grown impatient with the telecommunication giant's difficulty in winning customers. Asked about the discrepancy between the two forecasts, AT&T spokeswoman Linda Beighley said, "It will take more time to be profitable" than Cassoni had estimated in March.

No Specifics Mentioned

She said the latest forecast was based on recent company evaluations of the industry and the performance in 1987 of Cassoni's Data Systems Group.

She declined to disclose the specific factors that prompted AT&T to push back its target for putting the unit into the black.

But she noted that AT&T managed to cut the unit's losses by two-thirds last year. With industry analysts estimating that AT&T's computer business lost $800 million to $1 billion in 1986, that would put the 1987 deficit at $265 million to $330 million.

Analysts said the delay was a big setback for Cassoni, who was hired from Italy's Olivetti to revitalize the unit. While he has slashed costs, Cassoni has not managed to boost sales, they said.

Robert Morris, who follows AT&T for Prudential-Bache Securities in San Franciso, said Cassoni's efforts had been hampered by tough price competition in minicomputers and by the company's failure to distinguish its computers from those sold by rivals such as Digital Equipment Corp. and IBM.

"They just haven't offered the revolutionary new products," Morris said.

Strategy Debated

Analysts said the delay also called into question AT&T's computer strategy, which has stressed its experience in linking computers togethers in networks.

But Olson insisted that the computer operations would eventually take off.

"I think that in the three- to four-year time frame AT&T will be well-established not only in our traditional business of telecommunications but in executing a data networking strategy which includes computers," he said.

Olson said the company had taken several steps to bolster the unit, including giving Cassoni his own sales force.

In the interview, he appeared to be frustrated that critics were not allowing enough time for the changes to take hold.

"Why don't we just let time pass. I think there's been enough written about AT&T's computer business. And I think what I want to see happen in 1988 is a solid improvement in performance that will speak more than any rhetoric from Jim Olson," he said.

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