BUSINESSWEEK ONLINE : FEBRUARY 5, 2001 ISSUE
SPECIAL REPORT AT&T: Breakup III In its third restructuring since 1984, AT&T plans to break itself into four companies. Here's how the four units will stack up against the competition in 2002. The key characteristics of each unit are rated on a scale of one star, *, to four stars, ****. AT&T WIRELESS Revenue $10.3 billion Cash flow $1.6 billion HOW IT'S FARING Fell to No. 3 as rivals joined forces to create Verizon Wireless and Cingular. Still, wireless is AT&T's most powerful growth engine. Its revenues soared 35% in 2000, beating the industry average. RATING: ** GROWTH PROSPECTS The future looks very bright. And AT&T Wireless is flush with nearly $20 billion in cash after its IPO and an investment from Japan's NTT DoCoMo. That should help it invest. RATING: **** LEADERSHIP Some thought CEO John Zeglis, who had little wireless experience, was in over his head. But the DoCoMo deal was a coup. RATING: ** 1/2 AT&T BROADBAND Revenue $8.3 billion Cash flow $2 billion HOW IT'S FARING Some 93% of revenues come from cable TV. It's also selling local phone service. Reached its sales targets in 2000 by giving away service for new users. Its spin-off won't be completed until 2002. RATING: ** 1/2 GROWTH PROSPECTS Solid, but execution is key. To meet Wall Street's 2001 growth target of 16%, AT&T Broadband must take off the training wheels and hit targets without giving cable phone service away. RATING: ** 1/2 LEADERSHIP CEO Dan Somers has hit subscriber targets so far, and his job is secure, insiders say. RATING: ** AT&T BUSINESS SERVICES Revenue $29.2 billion Cash flow $10.5 billion HOW IT'S FARING Investors were counting on this unit to keep profits rolling in while AT&T dove into new businesses. But poor customer service and declining voice revenue overshadow rising data sales. RATING: * GROWTH PROSPECTS The unit faces a rocky future. No amount of data growth may be enough to offset losses in long distance. RATING: * LEADERSHIP The unit has had four leaders in the past 3 1/2 years. The current chief, Rick Roscitt, was supposed to be a star, but he dropped the ball over the past year. Industry observers say he's on the way out. RATING: * AT&T CONSUMER SERVICES Revenue $19.3 billion Cash flow $7 billion HOW IT'S FARING Consumer is the millstone around AT&T's neck. The restructuring was sparked by the need to isolate the problems here. But what will save Consumer from itself? It will be separated as a tracking stock in 2001. RATING: 1/2 GROWTH PROSPECTS None to speak of. Long-distance revenues shrank 11% in 2000, and the decline will worsen. AT&T hopes to compensate by selling high-speed Net access that will put it into competition with the Bells and AT&T's cable modems. RATING: 1/2 LEADERSHIP The unit has had three chiefs in four years. And neither of the current co-CEOs, Howard McNally and Bob Acquillina, has a chance of being named to the top job in the current CEO search. RATING: * _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Mike Armstrong's Last Stand CHART: The Trouble at AT&T TABLE: AT&T: Breakup III TABLE: Breaking Up Is Easy to Do CHART: AT&T Stock Price TABLE: Grading the Chief Armstrong on the Record INTERACT E-Mail to Business Week Online

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