Cap - I filched this off the QCOM thread, pretty amusing. Looking to trade some T and WCOM again soon, WCOM really getting beaten up over the past two days on heavy volume.
Regards,
John
PS - Too bad CMA didn't buy Krispy Kreme - could have provided some chips for further investing... <ggg> On the other hand, nah, he probably would have turned it into a tracking stock and it would have collapsed...
The people vs. C. Michael Armstrong
September 06, 2000
by Ali Asadullah
Editor's Note: Every Monday, Ali Asadullah will put someone new
on the stand for various crimes related to tech business. Then it's
up to you, the reader, to debate the case on our discussion boards.
On Friday, Judge Asadullah will issue his verdict, and, of course,
the proper punishment.
The defendant: C. Michael Armstrong, chairman and CEO of AT&T
The charges:
Biting off more acquisitions than he can chew
Confusing the world about AT&T's strategy
Failing to perform necessary triage on an ailing stock
The prosecution: Ladies and gentlemen of
the jury, AT&T (T) seems to be caught in a
diabetic brain fog. After bingeing on the
acquisition equivalent of two dozen Krispy
Kreme doughnuts and a 2-liter of Coke,
company CEO and Chairman Mr. C. Michael
Armstrong has no remedy for his current
indigestion.
First it was TCI, then MediaOne. After a
few quick chews and a couple of gulps, the
telecom colossus was onto the wireless world,
while still fighting fierce competition in the
traditional long-distance business, and
worming its way into broadband Internet
access. As part of the binge, AT&T shelled
out $3 billion to gain control of the
money-losing Excite@Home (ATHM), a
move that resulted in AT&T adjusting its
earnings estimates for Q3 and fiscal 2000
downward. Never a good move with
investors.
Then there was the joint venture with British
Telecom (BTY). And now there is talk of a possible merger with that
very same partner? My friends, the Blob had more structure and
direction.
The big bleeder, however, is AT&T's Business Services unit.
Responsible for nearly half of AT&T's revenue last year, the unit is
under serious pressure as it struggles with a viciously competitive pricing
environment and serious customer dissatisfaction. In fact, as of Oct. 1,
Pepsico (PEP) will drop AT&T in favor of WorldCom (WCOM),
which continues to encroach on AT&T territory, including the realm of
lucrative government contracts.
And of course there are the general financial woes. Judging by Friday's
closing stock price, AT&T has a market value of $119.3 billion -- only
slightly more than it spent ($110 billion) acquiring cable operators
Tele-Communications Inc. and MediaOne. Unacceptable, I say.
Additionally, AT&T has $57 billion in debt, its stock is just a couple
dollars higher than its 52-week low of $29.62 and the company isn't
even halfway to the 500,000 subscribers it said it would have for its new
cable telephony service by year's end.
I think the facts speak for themselves.
The defense: A CNBC report Wednesday pointed out the important
fact that so many truly great CEOs have faced challenges with
reference to stock performance. Specifically, CNBC noted Viacom's
(VIA) Sumner Redstone and Time Warner's (TWX) Gerald Levin,
both of whose companies currently enjoy stock prices well above the
dreaded 52-week low level.
Ladies and gentlemen of the jury, do not be swayed by alarmists who
would have you believe that dips in stock prices sound the death knell
for companies large and small. AT&T has survived the years of
reorganization after the breakup of Ma Bell, and it will continue to
survive and thrive under Mr. Armstrong's guidance.
All this talk of AT&T's supposed troubles overlooks the fact that Mr.
Armstrong is building a company that will have long-term success; near
term be damned. Did AT&T need to secure a future directly tied to
customer households? You bet. So instead of being locked out of that
business by the RBOCS, it bought into the cable business and ensured a
future in a business that naturally falls under telecommunications.
Did AT&T need to assert itself stridently in the wireless market? You
bet. And with its new AT&T Wireless Group (AWE) tracking stock
it has done just that.
Does AT&T need to cover its bases on all aspects of consumer long
distance? Once again, you bet ya. And what better way to do that than
aggressively marketing collect-calling services with commercials
featuring some of the most memorable faces on television?
Ladies and gentlemen of the jury, AT&T may seem like a Blob to you
now, but it is a winning constellation of services that Mr. Armstrong will
weave into a long-term plan that will create sustainable profits for the
company and provide security and enthusiasm for investors.
Instructions to the jury: What's it gonna be? Has C. Michael
Armstrong bitten off more than he can chew? Is AT&T so
scatter-brained that it will fail to find its way to a meaningful strategy in
the near future? Or is Mr. Armstrong steering a course that will
eventually leave AT&T cemented in all the important aspects of the
telecommunications industry?
Cast your vote in the jury's discussion room>> |
