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: *


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