telecom@eecs.nwu.edu (TELECOM Moderator) (02/20/89)
American Telephone & Telegraph Co. is planning a major re-organization aimed at making it more competitive and profitable, but analysts see no quick fix as the telephone giant re-tools to face competitors like Sprint and MCI. Chairman Robert Allen has authorized a reorganization that will divide AT&T's major operating groups into as many as 25 units, according to William Mullane, an AT&T corporate VP and company spokesman. The units, which will be phased in and will focus on specific areas such as consumer products, will be run as much as possible like independent businesses on their own, according to Mullane. He went on to point out that the decentralization will speed decision-making by placing profit and loss responsibility in the hands of the business-unit managers, and by forcing them to focus on meeting customer needs. Although this seems like a good idea, I think it will take years to streamline AT&T's bureaucracy and get the managers accustomed to being directly account- able for the performance of their business. AT&T reported a loss of $1.67 billion on sales of $35.21 billion in 1988. Its earnings included a net charge of $3.94 billion from writing off older equipment and accelerating the modernization of its long distance network. In order for Chairman Allen's plan to succeed, there are some fundamental obstacles to overcome first. Its biggest problem is in the U.S. long distance market, where it derives most of its earnings. Allen said last Thursday that AT&T's share of the $50 billion market had fallen to 68 percent, from about 84 percent before the Bell System was broken up in 1984. At the same time, MCI has been enjoying huge profit gains and making big advances in the telephone market in the last year. U.S. Sprint has also made some tremendous strides. This re-organization plan presented Robert Allen has the potential to be a big success -- or a big failure. 1989 should be an interesting year in the telephone industry, to say the least. Patrick Townson