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To: Geoff Nunn who wrote (49593)	7/2/1998 12:28:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Good morning Geoff, OT I will partially agree with your assessment. I disagree with the notion to merge with "someone, anyone" was the motive. If true, why did they voluntarily spin off LU and NCR? I think the motive was to increase corporate profits which will increase management's bonuses because I don't believe those bonuses are tied to earnings per share. That is, you can screw the shareholder and make more money in the process. Here's how it works. Suppose you have a company earning $100 million per annum, and let's say that management bonuses amount to 15% of earnings. So management is entitled to $15 million. Being greedy, they wish to add to their total, so they decide to buy another company earning $25 million per annum. That would add a quick $3.75 million to their bonus checks. The price they pay for the company is irrelevant because it is done with paper rather than cash. And besides which, if the price of the stock falls too much they can always get their options repriced (a la Seagate, IBM etc.) with the threat that they will leave for another company. So, I think management is rewarded for increasing total corporate earnings and is immune to the effects of dilution on shareholders. That's why we see companies merging at big premiums to the market. So here we have AT&T buying TCI for $48 billion in funny money (stock). What will AT&T get out of it? According to them, it will add around $7 Billion annually in earnings before interest depreciation amortization and taxes. Plus, the company says it will realize annual savings of $2 billion. Now let's say that depreciation and amortization will be 3 billion and that the statutory income tax rate is around 30%. That leaves earnings of $4.2 billion. Now I ask you, as a rational individual, do you pay $48 billion to net 4.2 billion annually in a risky venture? And where does the cost to improve infrastructure enter into the picture ($500 per household is the number I heard)? There is something dreadfully wrong with a system that allows management to repeatedly rape shareholders. I don't know what the solution is, but surely there must be one. These people are presumably our employees, hired by us to act in our best interests. I think its time for a reality check. TTFN, CTC