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AT&T considers options
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August 11, 2000: 9:17 a.m. ET
Telecom mulls spinoff, tracking stock to boost dwindling share price
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NEW YORK (CNNfn) - AT&T Corp. is considering a variety of options to boost the value of its business and cable segments, including launching a tracking stock of its consumer long-distance unit and/or a separate stock for its broadband business, a source close to the situation said Friday.
AT&T Corp. is weighing all options to shore up its dwindling stock price, which has lost nearly 39 percent in the past year, the source said. A spin-off of the consumer long-distance business would separate the company, leaving AT&T's faster-growing business and cable segments.
 Profit from the consumer business is growing at a 20 percent rate and in fiscal 1999 generated $8 billion in earnings before interest and taxes. But the unit creates a drag on AT&T's earnings as a whole, the source said. With the consumer business, New York-based AT&T Corp. (T: Research, Estimates) reported $62 billion in revenue, a 3 percent growth rate in 1999. Without the consumer business, AT&T would have had $42 billion in revenue growing at a12 percent rate.
A separation would shore up the AT&T's share price, boosting the company's overall value, the source said.
AT&T declined to comment.
Analysts have valued AT&T at $45-to-$73, but its stock price does not reflect this and hit a 52-year low this week of 29-5/8.
"The consumer long-distance sector is viewed as an albatross for all of the long distance carriers these days," said analyst David Burks, of J.J.B. Hilliard, W.L. Lyons. "AT&T is not the only one considering such an action."
The long-distance business has become increasingly competitive while the margins have thinned, Burks said. All of the prominent carriers have seen their stock prices plummet. WorldCom Inc. (WCOM: Research, Estimates) hit a 52-year high of 61-11/32 but is now trading near its lows while Sprint Corp. (FON: Research, Estimates) was trading in the 70s and is now also hitting new lows, he said.
"AT&T needs to look at fundamental issues of how to run its business and how to reflect that value in its stock," one analyst said, who declined to speak for the record.
On Friday, AT&T CEO C. Michael Armstrong acknowledged that a number of options are being considered, The Wall Street Journal reported. AT&T is considering a spinoff of its consumer long-distance business and a tracking stock or a spinoff of Liberty Media Group, its cable business. AT&T also is considering a possible merger of the two units and a subsequent spinoff of the combined group, the newspaper said.
WorldCom gained 7/16 to 33-13/16, Sprint rose 7/16 to 34-7/16, and AT&T gained 3/16 to 31-1/16 in afternoon trading Friday. 
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AT&T
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