|
AT&T CEO rewires future
|
 |
July 13, 1998: 3:51 p.m. ET
Armstrong sets new direction, vision for nation's leading long-distance firm
|
NEW YORK (CNNfn) - "Assume nothing" is a nugget of conventional wisdom C. Michael Armstrong doesn't dole out just for effect.
The chairman and chief executive of AT&T says it's the credo that shapes the decisions in his personal and professional life everyday. "I have these two words on a sign on my desk and I look at it every morning," he said.
He grew up near Detroit, and became captain of the high school football team and senior class president.
But a sports injury cut his athletic career short and led him on a new path that eventually took him to the top position of the nation's largest long-distance telephone company.
Since joining AT&T in November 1997, the 59-year-old Armstrong has been passing for yardage -- with or without investor consent.
He already has laid the groundwork for up to 18,000 layoffs, unveiled plans to shed non-core business units and begun exploring marketing alliances with Internet services providers and the regional Baby Bells. Those alliances are aimed at selling AT&T's long-distance service through local channels in the newly deregulated marketplace.
The workforce reduction is expected to save the company between $3.5 billion and $4 billion a year.
And then, of course, there's AT&T's stunning $48 billion marriage proposal in June to cable colossus Tele-Communications Inc.
"He's a killer, he gets the job done," S&P Equity Group analyst Philip Wohl said of Armstrong. "He has no hidden agenda. He looks at the bottom line and goes from there. He's like a terminator."
Under AT&T's former regime, headed by Robert E. Allen, Wohl said, the telecommunications titan lacked direction and suffered from shrinking market share.
"They never took a chance," Wohl said. "Armstrong has a good track record from Hughes [Electronics Corp.] and he is a known turnaround specialist."
That take-no-prisoners business strategy reportedly has earned Armstrong the respect of his peers. It also, however, has got investors in the most widely held stock in America running scared.
Fearing repetition of the industry's so-far failed attempts to merge major telecom firms with cable companies, AT&T shareholders have been dumping stock since the announcement.
AT&T's (T) shares have slid to about $57 from a 52-week high of $68.60 in April.
(Click here to see a chart of AT&T's stock activity)
Investors also fear AT&T has underestimated the cost of upgrading TCI's cable network.
They may be right. Already, AT&T has revised upwards by several million dollars the price it will pay to renovate TCI's lines.
And, even then, it's still not a sure thing.
In an interview last week, TCI Chairman John Malone conceded the sharp drop in AT&T's stock price could kill the deal.
"It scares me to death to see their stock going down,'' Malone told Broadcasting & Cable, a trade publication. "Scares me to death because I think it could well kill the deal.''
Armstrong testified before Congress last week that the deal's terms were not open to renegotiation. But Malone said some details had never been completed and still were being worked out, including the formation of tracking stocks to follow the performance of new AT&T divisions.
Plugging in
The steps Armstrong has taken to strengthen AT&T's position in the competitive telecom market boil down to his self-described vision for the future.
"I believe the world's most ubiquitous Internet access device will be the telephone," he said in a speech last month to the Harvard Business School Club of New York.
"Today, the network gives you a dial tone that enables you to talk, to fax or to be online," he said. "Tomorrow, the network will give you a dial tone that automatically stores your messages, enables you to talk rather than type, and accesses information with a command from your thumb rather than computer jargon from a screen."
He added that 75 percent of Internet transactions are comprised of messaging, chat and electronic mail, functions that would be accomplished more easily "with our thumb on a phone, not with two million lines of software on a PC."
AT&T, he hopes, can provide that service.
Climbing the ranks
Armstrong started his career at IBM Corp., (IBM) in 1961 after graduating from Miami University of Ohio.
During his 31 years with the company, he completed the advanced management curriculum at Dartmouth Institute and climbed the ranks from system engineer to senior vice president and chairman of the board of IBM's World Trade Corp.
Armstrong, who was widely recognized for getting IBM's struggling global operations back on track, was then tapped by General Motors Corp. (GM) to head its wholly owned Hughes Electronics Corp., which designs and markets advanced electronic systems.
During his six-year tenure there, he is credited with restructuring Hughes to become less focused on defense and more involved in commercial electronics, and telecommunications.
Armstrong also was the driving force behind the successful launch of Hughes' "DirectTV," a rapidly growing direct-to-home digital broadcast business in which AT&T holds a 2.5 percent stake.
Today, he runs the $52 billion AT&T empire of 90 million customers and 130,000 employees, for which he receives a base salary of $1.4 million, not including hefty stock options and incentive awards.
Looking ahead
Whether or not investors agree with Armstrong's business strategy, one thing is clear: He isn't afraid to take changes, nor to position AT&T on the front lines of telecommunications, where the battle lines are being drawn.
"My view is that when [Armstrong] assumed his current role he had some very difficult challenges," said AG Edwards analyst Tony Ferrugia. "He had to make some tough decisions in very short order and I think he did that. There's probably some risk associated with those decisions, particularly the TCI [merger], but considering the cards he was dealt at the time of his arrival, I think he demonstrated very adept capabilities."
In a recent speech to shareholders, Armstrong suggested he's not done yet.
"We have more to do to achieve a competitive cost position and invest for growth," he said. "We have set aggressive targets to cut costs, particularly sales, general and administrative expenses, to make us competitive with our rivals of today as well as of the future. In addition, we must strengthen profitability and invest wisely to grow and achieve market leadership." 
--by staff writer Shelly K. Schwartz
|
|
|
|
|
|
AT&T
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
