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The Problems At At&T


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THE PROBLEMS AT AT&T

These are troubling times for AT&T. Given the enormous technological and regulatory changes sweeping through the telecom industry, it would have been well nigh impossible for the company to escape wrenching turmoil. AT&T Chairman Robert E. Allen has responded to the forces of change with a blizzard of corporate strategies. He has tried downsizing, driving into new markets, buying new businesses, restaffing, and even doing a "trivestiture" of the company, spinning off the phone equipment and computer businesses to allow AT&T to focus on telecommunications. Yet despite his best intentions, it isn't working. During Allen's eight-year reign, the stock has performed well below the S&P 500 index, and it is currently trading near its 52-week low. It's time for the board of directors to admit that AT&T's problems are beyond the grasp of current management. It should take direct and full responsibility for bringing in fresh outside talent of the highest caliber. Even Allen admits that his succession has become the key management issue at the company. It's an issue that should be resolved quickly, long before Allen's scheduled retirement in the year 2000.

AT&T needs the talents of people who can manage a commanding strategy for the converging voice, data, and video communications of the 21st century. Already, people are making calls and faxes over the Internet without paying long-distance charges. If AT&T can capture a decent share of the $500 billion voice-data-video market, it will prosper even as the erosion continues of its position in the $76 billion U.S. long-distance market (page 122).

AT&T's board of directors must prepare the company for the next phase of the technological revolution by finding the strongest possible outside management. Pronto.


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