Reorganizing AT&T: From Vertically Integrated to Customer-Centric Organization (B) |
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"Changes in customer needs, technology and public policy are radically transforming our industry. We now see this restructuring as the next logical turn in AT&T's journey since divestiture (1984). It will make AT&T's businesses more valuable to our share owners, even more responsive to their customers, and better able to focus on the growth opportunities in their individual markets." 1 - Robert Allen, former Chairman and CEO, AT&T, justifying the 1995 break-up. "In breaking it up, AT&T wanted to increase its share value, which may work in the short run, but the company has set itself up for more trouble in the long run by separating the operations. AT&T never really worked out a way to be a vertically integrated company." 2 - G.Anandalingam, Professor of Telecommunications Management, Wharton School, commenting the 1995 break-up. IntroductionIn September 1995, Robert Allen (Allen) announced the biggest voluntary break-up in corporate history. The erstwhile AT&T was split into three stand-alone companies - the New AT&T, Lucent Technologies and NCR. Explaining the reasons for this move, Allen said, "It has become clear that for AT&T's business to take advantage of the incredible growth opportunities...it has to separate into smaller and more focused businesses.
Analysts felt that Allen was resorting to another breakup due to AT&T's poor stock performance and its inability to face intense competition. The break-up of the Bell System had led to AT&T's market share in the telecom business plummeting from more than 90% in 1984 to around 50% by early 1996. Wall Street reacted favorably to Allen's announcement, with AT&T stock rising from $38 to $50 by late 1995 (Refer Exhibit I). AT&T appeared to shift from its traditional long distance telephony business to the fast emerging communication and information services business including wireless communication, online services, consulting and e-commerce.
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1] As quoted in the article titled "AT&T Announces Major Restructuring For 21st Century," posted on www.lucent.com, September 20, 1995. |
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