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Investors hang up as AT&T stumbles

Shares hit a new 52-week low as investors question the company's guidance under chief executive C. Michael Armstrong.

AT&T shares hit a new 52-week low today as investors continued to question the company's future under the guidance of chief executive C. Michael Armstrong.

The telecommunications giant has suffered through a number of business problems over the past months. Along with sinking long-distance phone rates, AT&T has stumbled in its efforts to introduce new services on time. Also, the company is still working to absorb the enormous costs involved with integrating its various cable acquisitions, including MediaOne and TCI.

All these factors have contributed to a steady decline in Ma Bell's stock price. Trading in the $60s not six months ago, the shares closed at $28.13 today, down 75 cents.

"Push has come to shove" for AT&T to improve its business, said Current Analysis analyst Carl Garland. "They don't have a lot of time."

A number of proposals have been floated to restructure AT&T, including a partnership or purchase of Nextel to expand the reach of the company's wireless division. Other ideas include a spinoff of AT&T's consumer long distance unit, or a merger with British Telecommunications.

The AT&T board of directors heard various restructuring pitches at its annual retreat late last week, but by all accounts, failed to reach any conclusions.

"No decisions have been made" on any restructuring of the telecom giant, AT&T spokesman David Caouette said.

Investors, meanwhile, are becoming increasingly nervous as AT&T shares repeatedly set new lows. Leading dissidents have been board members John Malone, chairman of the AT&T subsidiary Liberty Media and AT&T's largest individual shareholder, and his longtime colleague from the cable industry, Amos Hostetter, head of the former Continental Cablevision. Hostetter sheparded his former company, after it became MediaOne, into AT&T's arms last year.

The latest shareholders to express concern pension funds for the city and state of New York, which hold about 25 million AT&T shares worth about $702 million--about half of their worth earlier this year.

New York State comptroller H. Carl McCall and city comptroller Alan Hevesi wrote CEO Armstrong last Friday saying "we are troubled by the continuing decrease of the value of our investments in the company."

McCall and Hevesi, citing "mounting anxiety and concern among some investors," requested a meeting with Armstrong complete with briefing materials on all restructuring options under consideration and how they might impact long-term growth.

Caouette couldn't say if a meeting would be held, but said AT&T management "regularly meets with investors."

"We understand they have concerns about AT&T's stock price. They're not happy and neither are we," Caouette said.

AT&T told investors and analysts last week not to expect fireworks from the board retreat, and has hinted that it could be some time before the company has any major plans to announce.

In fact, reports have said the only action the board showed any interest in at the retreat was furthering a business services partnership with BT, but reports out of London suggest that could be difficult to accomplish because of disputes about which side would be in control.

"That combination could make some sense," said Garland, because their joint venture Concert "has always been a bit confusing." He said AT&T's efforts to move some of its business customers to Concert is part of the reason the business division is suffering. Still, he didn't see a BT partnership as the answer to AT&T's stock woes.

"AT&T still has a lot going for it," Garland said, including "a hell of a lot of broadband." He recommended AT&T work to capitalize on its existing infrastructure and sell new services to its long-distance customer base. "They'd be crazy to let go of long distance," Garland said.

Although these opinions could change, 12 of 19 analysts still list AT&T as a "buy" or "strong buy," with the rest at "hold." Most analysts recommending bullish on AT&T stock cite the company's growing revenue and strong cash flow. They also preach patience, noting that the shift to cable that Armstrong began two years ago still needs some time to take root.