BinK, I too have been following up on that and participating in some discussion on the yahoo boards etc. I reviewed the posts on the ATT board and elected not to query the poster as to tell you the truth, the posts and responses seemed valid and I didn't want any part of it. The fact that the poster posted well after the market closed, seemed to be a telecom person and genuinely excited about VOIP, etc., combined with the fact that we are still two weeks away from options expiration, all lead me to take the talk seriously. However, the discussion has now reached several boards and is certainly warranted here. We need to bear in mind that everyone gives their opinions about things and we need to come to our own but based on what I have read and been able to deduce, I think it is possible.
As a poster pointed out on yahoo, Howie was very nervous when questioned about ATT, but in an excited way. Analysts were expecting him to announce ATT's switch to VOIP but he was unable to do so and the reasoning he gave while sound, was not accepted and Howie could not be more forthcoming.
The last 3 rumors on this stock, AOL, ATT and lastly CSCO, have all come true and they have all started on other boards. The stock has each time bid up at least $15 before eventually selling off when the news was released but my point is that only a fool would ignore this rumor just on a trading basis and this one, the stock wouldn't sell off on, if T were to really tender at $75 for NTOP.
Now, lets talk about why they might do that.
The WSJ recently reported on October 4, that ATT was looking to spinoff their LD business, not sell it. In this market that would be a pretty dead spinoff. However, if you take your LD, spice it up by switching to cutting edge technology, (VOIP) that will save you 10 Billion per year:
Message 13376050
and double your cash flow, throw in NTOP as a wholly owned subsidiary, you have a very sexy operating unit that is worth 2-3 times as much, maybe more and suddenly, ATT looks like a genius.
Read this post on ATT:
Message 14535413
Then read this WSJ article:
I think it would be a great move by ATT and wouldn't discounbt the possiblity or rumor one bit. Further, $75 per share would be cheap for what they pull off. Note, that IDT still retains 10M shares of NTOP. ATT would have to buy those and tender for the balance. My guess is they would pay the same price.
October 4, 2000
Tech Center
AT&T Proposes Long-Distance Spinoff;
Talks With Nextel, BT Likely to Continue
By DEBORAH SOLOMON and NIKHIL DEOGUN
Staff Reporters of THE WALL STREET JOURNAL
AT&T Corp.'s management, in what would be a significant step toward breaking up the telecommunications giant, has proposed spinning off its struggling consumer long-distance business to shareholders, according to people familiar with the matter.
1Company Profile: AT&T
* * *
2Heard on the Street: Missed Call on AT&T Stock Could Affect Salomon Analyst
3AT&T Holders Question Ability Of Chief to Turn Around Concern (Sept. 26)
The board was briefed on the proposal at the annual board retreat, held late last month in Basking Ridge, N.J., and appears to be leaning in favor of such a move, these people said. AT&T, the nation's No. 1 long-distance telephone concern, has weighed several options for its consumer long-distance business and has courted possible buyers, including Verizon Communications Inc., for the past several months. It isn't clear why the company's management, including Chief Executive C. Michael Armstrong, now wants a spinoff instead of a sale. AT&T may have failed to get the price it wanted for the business, which generates $8 billion in cash flow, or may have decided for some other reason to do a spinoff instead.
One issue that AT&T continues to discuss is how to structure agreements with the spun-off entity that would allow AT&T to continue to offer bundled services to its customers. Those services include cable, high-speed Internet access and wireless.
Spinning off consumer long distance, the business that built AT&T into a U.S. icon and one of the country's most widely held stocks, would amount to one of the biggest corporate restructurings ever, as significant as its 1984 breakup, which spun off the regional Bell companies, and the 1996 spinoffs of Lucent Technologies Inc. and NCR Corp.
Afterward, it is likely that little will be left of the telecommunications giant as it is now known. Instead, it will look more like a broadband concern, with its cable holdings and possibly its wireless business.
AT&T Wireless Corp. is continuing to hold merger discussions with Nextel Communications Inc., and AT&T also is discussing combining its Business Services unit with British Telecommunications PLC's business division.
AT&T has considered spinning off the long-distance business with Liberty Media Group, a content and programming concern that trades as a tracking stock of AT&T, but that plan seems to have lost momentum, raising the prospect that Liberty will be spun off separately. There could be tax implications for such a spinoff, however.
AT&T is working feverishly on the Nextel transaction and the BT business-services deal to try to get agreements finalized by the late-October board meeting. Indeed, a person familiar with the matter said the company may prefer announcing the Nextel and BT transactions before the consumer spinoff. Business Services differs from the consumer unit because it sells long-distance and other services to corporate clients, while consumer focuses on residential.
AT&T has been looking to unload its hallmark consumer long-distance business as a way to help turn around its beleaguered stock price and sluggish revenue growth.
What was once AT&T's core business, with 60 million customers, is now viewed as a drag on the company's overall rate of growth.
While the long-distance business is a cash cow with $21 billion expected in revenue this year, growth is slowing and revenue over the long haul is expected to decline. Aggressive pricing by the major long-distance carriers has knocked long-distance prices to extremely low levels, and AT&T's consumer long-distance business is expected to grow in just a single digit.
AT&T declined to comment.
AT&T's stock price has fallen 52% since its 52-week high last November. At 4 p.m. in New York Stock Exchange composite trading Tuesday, AT&T rose 13 cents to $29.13.
AT&T's board will gather later this month for a regularly scheduled meeting; the company is expected to report third-quarter earnings toward the end of the month.
The original intention was to have the proposals wrapped up by the board meeting so they could be presented to investors in one shot.
However, the financial parameters for a deal with Nextel are complicated, partly because the wireless business trades as a tracking stock. Several issues, including management of the combined entity, need to be worked out.
The discussions with BT to merge business services are proving even more nettlesome, so it will be difficult to have all three deals ready for formal board approval.
Spinning off consumer long-distance business is the easiest to get done, however, since it doesn't require negotiations with other parties and has the support of management and some board members. But while a spinoff of that long-distance division may help AT&T regain some of its footing, it isn't clear that the consumer business can stand alone.
The company has looked at taking similar steps before, but has been confounded about what to do in part because the unit is so profitable and funds much of AT&T's other businesses, including the enormous debt from its cable acquisitions.
Indeed, last year Mr. Armstrong made it part of AT&T's mission to maximize the consumer division's profit and raised the internal Ebitda -- earnings before interest, taxes, depreciation and amortization -- targets on a regular basis, said people familiar with the matter. He also raised revenue targets and pushed the division to increase its market share, these people said.
Mr. Armstrong was pushing for higher numbers to help service the debt the company had taken on by spending $100 billion to buy two cable concerns, said a person familiar with the strategy.
"It was pretty obvious that the company had taken on an awful lot of debt because of the heavy premiums it paid for cable and consumer long-distance was there to service that debt."
URL for this Article:
interactive.wsj.com
Hyperlinks in this Article:
(1) interactive.wsj.com
(2) interactive.wsj.com
(3) interactive.wsj.com
(4) mailto:deborah.solomon@wsj.com
(5) mailto:nik.deogun@wsj.com
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