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Commentary: Cracks in the bell tolled the story

Gartner's assessment is that there is little value in the restructuring for the new AT&T Business and Consumer companies, but AT&T Wireless and AT&T Broadband may benefit.

By Ken McGee, Gartner Fellow

In response to long-standing market dissatisfaction over its financial performance, AT&T decided to split the giant corporation into four companies in a restructuring plan that AT&T will complete in 2002.

See news story:
AT&T makes its four-part breakup official
The four companies are AT&T Wireless, AT&T Broadband, AT&T Consumer and AT&T Business (which will inherit the coveted "T" stock exchange ticker symbol and own the AT&T brand name). Each unit will become a publicly traded company, trading as a common stock or tracking stock.

AT&T apparently concurs with the widespread view that its parts are likely greater and more valuable than the whole.

However, Gartner's assessment is that there is little value in the restructuring for the new AT&T Business and Consumer companies. In a scant few weeks, once the uproar and hype die down, the four new AT&T entities probably will continue to perform much as they have been, as if no split will occur. Anxiety over the separation during the subsequent two-year restructuring process is justified because the new companies will likely confront the same nagging issues that led to the restructuring in the first place.

Those issues--a less-than-lean work force, slowness to market and a ponderous bureaucracy--will likely plague each company, even though layoffs will probably ensue. AT&T Business will likely maintain a firm hold on its Fortune 1000 customers, but will probably lose market share among small and midsize enterprises. AT&T Consumer will likely continue as a cash cow, continue to suffer eroding market share and continue to weigh down the value of the new AT&T stock.

Gartner believes that the only real winner in the restructuring will be AT&T Broadband. AT&T Wireless may achieve a potentially positive outcome, although separating AT&T Wireless from the fold lets loose a tantalizing opportunity for WorldCom to move to finally gobble up the wireless company it has long savored.

AT&T Broadband will likely capitalize on increases in consumer online shopping through its intention to charge retailers a fee for delivering consumers to their Web sites, and by charging retailers a commission on the value of goods bought from their online stores.

(For related commentary on terms associated with AT&T's telephone operating units, see registration required.)

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.