BUSINESSWEEK ONLINE : FEBRUARY 5, 2001 ISSUE
SPECIAL REPORT

Grading the Chief


After arriving at AT&T in November, 1997, Mike Armstrong attempted an ambitious overhaul. Here's a look at his record after three years:


MILESTONES...


MIKE THE AX
Armstrong has cut sales, general, and administrative costs to 20% of revenues from 28% in the past three years, giving AT&T (T) a cost structure comparable to that of its competitors.

CULTURE CHANGE
He hammered away at AT&T's sleepy culture to boost the company's performance--at least for his first year. He issued stock options to all employees, tied compensation to performance, and reduced layers of bureaucracy. He also cut into cushy expenses, such as corporate cars and consulting fees.

USED HIS CURRENCY
He made his cable buys with AT&T stock before the decline in the long-distance business destroyed the value of his currency. It would have been almost impossible to cut the same deals later.

HELLO, WIRELESS
He transformed AT&T Wireless (AWE) from a collection of local businesses into a national digital business that's growing faster than rivals.


MISSTEPS...


LOST LEADERS
Turnover has been a nagging problem since Armstrong's arrival, in part because of his controlling management style. Business Services has had four CEOs in the past three and a half years, and AT&T's other three major businesses have each lost at least one chief.

BOUGHT HIGH, SOLD LOW
Armstrong bought Tele-Communications and MediaOne when valuations for cable-TV assets were near their peak. He paid about $105 billion. They'll be worth some $80 billion when he spins them off, analysts say.

LOCAL TELEPHONE STATIC
Armstrong failed to cut deals with other cable operators, notably Time Warner (AOL), to sell local phone service. That handicapped him because AT&T can market cable telephony only in regional markets instead of nationally.

BOTCHED CUSTOMER SERVICE
When AT&T moved large corporate customers to its Concert joint venture with British Telecom (BTY), many AT&T salespeople quit and service deteriorated. Customers defected, contributing to AT&T's poor financial performance last year.



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