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AT&T downplays reform rumors on Wall Street

Company board members tomorrow will gather for a two-day retreat to discuss the company's future, but already they're warning Wall Street not to expect big changes.

AT&T board members tomorrow will gather for a two-day retreat to discuss the company's future, but already they're warning Wall Street not to expect big changes.

The board embarks on a retreat annually, but this year rumors abound concerning the getaway's outcome in light of AT&T's recent stock woes. The company has suggested that no immediate changes may occur, however, and if they do, they will be in the interest of long-term stability, not a short-term stock fix.

AT&T won't say what will be on the agenda when the board meets tomorrow at an undisclosed location near corporate headquarters in Basking Ridge, N.J. Rumors circulating include speculation about a spinoff of the wireless division that might be partnered with Nextel, a further partnership with British Telecom, or a spinoff of consumer long-distance, which could then be sold to a consortium of cable companies.

With AT&T's stock trading near its 52-week low, analysts said they will watch closely to see what emerges from the retreat. But they said they've been warned not to expect any dramatic announcements. Still, that doesn't mean the dramatic wouldn't be welcome.

As far as the need to do something, anything, at the retreat, "their stock price has kind of forced the issue," one analyst said.

AT&T usually floats trial balloons regarding its wireless service, analysts said, which board member John Malone--Liberty Media chairman and AT&T's largest individual shareholder--feels is undervalued. However, the consensus among analysts was that AT&T must address the consumer long-distance division, which faces sharp declines in revenue from increasing competition.

A recent Merrill Lynch report suggested that though AT&T had been "impressively successful" in containing costs in this division so far, eventually the division could go from being a key source of revenue to one that loses money for the company. Another analyst said that poses problems because AT&T uses revenues from that division to fund its growth areas.

Analysts don't believe the job security of AT&T chairman Michael Armstrong is in jeopardy, or that any major restructuring that would remake his model for the company will emerge from the meeting. But Armstrong's recent insistence that change will be focused on improving operational performance as the best way to improve stock didn't impress every trader.

What will make investors sit up and take notice?

"Get rid of consumer long-distance," said one analyst, whose sentiments were backed by Merrill Lynch and others.

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