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AT&T Considers Break-Up to Staunch Stock's Decline

October 23, 2000|Washington Post

AT&T Corp.'s governing board is expected today to consider several proposals aimed at radically restructuring the company, including spinning off its enormous residential long-distance phone business, in a bid to halt the dramatic slide of its stock price, sources with knowledge of the plans said. AT&T already is in the midst of one fundamental remaking: Under the guidance of its brash chief executive, C. Michael Armstrong, the company has spent more than $100 billion to acquire cable TV systems, with plans to upgrade them into conduits for telephone and high-speed Internet connections. But that plan has foundered amid mounting costs and slower than expected growth in customers. Meanwhile, AT&T's core long-distance business has eroded in the face of mounting competition. All the while, the company's stock has slipped, losing more than half its value this year. The company is now worth less than it was when Armstrong assumed the helm more than three years ago. Armstrong recently has concluded the company's various parts are now worth more individually than they are in combination. Thus, he has asked the board to consider several options that would effectively break the company into pieces. He has promoted a break-up as the best way to highlight AT&T's fastest growing businesses--its cable holdings and its national mobile phone business, AT&T Wireless. The company is also pursuing a merger of its national wireless business with Reston, Va.-based Nextel Communications Inc. Sources close to the companies say the talks have stumbled over a disagreement surrounding who should run the resulting company. AT&T is also scheduled to report third-quarter earnings this week. On Friday, shares rose $2.19 to close at $27 on the New York Stock Exchange.

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