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Kandel on AT&T
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October 27, 2000: 6:00 a.m. ET
With all of its recent troubles, could it be time to move Ma Bell from the Dow?
By CNNfn Financial Editor Myron Kandel
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NEW YORK (CNNfn) - - AT&T was once the quintessential "widows and orphans" stock, solidly stable, sure to pay a respectable dividend and not too adventurous. That's not so anymore, of course, and I trust the widows and orphans have not been depending on it lately for their sustenance.
The stock has been in the dumps, and took another beating this week. And the company's management -- under CEO Michael Armstrong, once hailed as a corporate savior -- has been floundering as it tries to find the right direction and reverse the battered stock price.
After a barrage of rumors, leaks and trial balloons, Armstrong unveiled a new plan that involves four separate stock market entities --- wireless; broadband/cable; consumer long-distance, and business services. Wall Street greeted this restructuring with a big yawn, slicing more than $5 a share from AT&T's already-battered stock price on Wednesday and Thursday. The stock has lost more than half its value so far this year.
 The media, as well as Wall Street, has been very tough on AT&T, Armstrong and the restructuring plan, so I'm a bit hesitant to pile on. But I will speculate that when the poobahs at the Wall Street Journal discuss changing the components of the Dow Jones industrial average, they might very well consider dropping Ma Bell from that blue-chip assemblage. After all, AT&T (T: Research, Estimates) has already spun off its vaunted Bell Labs into Lucent Technologies (LU: Research, Estimates) (now having problems of its own), and it's getting ready to slim down even more.
It wouldn't be that revolutionary a move. At Thursday's close of $21.81, AT&T is the lowest-priced stock on the Dow. And it has happened once before. AT&T first joined the Dow in 1916, but then was removed in 1928. It came back in 1939, and has remained there ever since, even after the divestiture of the seven Baby Bells. I emphasize that dropping the company this time around is strictly my own speculation. The editors of the Journal are very secretive about their plans for the Dow, knowing that any leak could have a market impact.
But they will have to make a decision about the Dow before long if and when General Electric (GE: Research, Estimates)'s acquisition of another Dow stock, Honeywell International (HON: Research, Estimates), takes place. That would be the first time one component of the 30-stock average has taken over another since 1907, when U.S. Steel acquired Tennessee Coal & Iron. So the G.E.-Honeywell combination would leave a vacancy. My thought is that instead of filling just that one spot, the Journal might decide to take a broader approach, and that's where dropping AT&T might be considered.
Making more than one change would not be unusual. Each of the last two times the Journal changed the Dow --- last November and March, 1997 --- it added four stocks and dropped four. Those eight newcomers, by the way, are Microsoft (MSFT: Research, Estimates) and Intel (INTC: Research, Estimates) (the first NASDAQ stocks to join the DJIA), Home Depot (HD: Research, Estimates) and SBC Communications (SBC: Research, Estimates), which came aboard last year, and Hewlett-Packard (HWP: Research, Estimates), Johnson & Johnson (JNJ: Research, Estimates), Travelers (now Citigroup (C: Research, Estimates)) and Wal-Mart, which were added in 1997.
Whether AT&T goes or stays won't determine the company's fortunes, although removal would be a blow to its corporate psyche. What will determine its future is how well Armstrong and his fellow executives move the company and its new spin-offs into the forefront of the business world in which AT&T once was a proud leader. 
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