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2HRS2GO: More tracking stocks won&#039t revive AT&T shares

"Nobody's going to just let the stock sit at $32," -- one person, calling attention to the deflated stock price of AT&T (NYSE: T).

That's according to today's Wall Street Journal, which reports Ma Bell is thinking about more tracking stocks, among other options, to reinvigorate T shares. Maybe AT&T's board likes what it's seen so far from the AT&T Wireless Group (NYSE: AWE) stock introduced in April.

If so, those directors would be only ones pleased with AWE, since the wireless tracking shares' price has dropped almost 29 percent since peaking at 36 on May 1, shortly after their debut. The S&P 500 has lost about 1 percent over the same period.

But that comparison apparently hasn't stopped AT&T from at least pursuing the idea further. Apparently the company has revived the concept of tracking stocks for consumer long-distance, cable TV and other businesses -- in other words, everything else. John Malone may be just one director, but his love of tracking stocks -- a staple of his TCI style -- clearly has caught on with the rest of the board.

To this day, I don't understand the investor appeal of tracking stocks. It's paying for equity and not getting it, since your voting rights over the specific business being tracked are negligible. That's why institutional investors often shy away from the darn things.

Scrutinize the Wall Street propaganda about "unlocking value" and consider: is there any value to unlock in the long-distance phone business? No. It's a poor business, which is why AT&T bought all those cable assets in the first place, and why Bernard Ebbers wants Worldcom (Nasdaq: WCOM) to dump the whole thing. Cable TV? Not a great business in and of itself, which is one reason why TCI is no longer independent.

The whole point of C. Michael Armstrong's new AT&T is to blend these disparate businesses into a potent package of communications and media services delivered over those cable lines. Until that vision becomes a reality, AT&T's stock price will remain stagnant.

AT&T just passed the 75,000 mark on cable telephone subscribers, meaning the company still has more than 80 percent to go before achieving its target for the calendar year. At the same time, AT&T's profit and revenue growth remain in the single digits.

Meanwhile, companies like Worldcom or Qwest Communications (Nasdaq: QWST) are boosting the top and bottom lines rapidly because their business mostly comes from business, as opposed to AT&T's large consumer base. To Armstrong's credit, AT&T's business services unit is doing well. Unfortunately, its still not big enough to offset the rest of AT&T.

Still, don't blame AT&T for trying financial tricks. After all, they've worked for years at Lou Gerstner's IBM (NYSE: IBM), which continues to spend many millions every quarter on share buybacks.

But at least that returns money to shareholders. You can't say the same about tracking stocks. 22GO>