NEW YORK (CNN/Money) - AT&T is holding its annual shareholder meeting Wednesday in Savannah, Georgia. But things are far from peachy at Ma Bell.

Not only is AT&T the worst performing stock in the Dow Jones Industrial Average this year, plunging 26.2 percent, it is now the second smallest of the Dow 30, with a market value of $15 billion. (Only Eastman Kodak is worth less.)

If that weren't enough to make AT&T (T: Research, Estimates) shareholders want to hang up the receiver in frustration, Ma Bell is the worst performing stock in the S&P 500 as well. Only the annoying Carrot Top collect-call commercials induce more cringes from AT&T shareholders than this sad fact.

AT&T has been struggling to find a way to revitalize sales and profits in long distance telecommunications, a business beset by brutal price competition. The fact that WorldCom is set to reemerge as a slimmed down MCI doesn't help matters.

Sure, AT&T has been granted permission to try and pick off local customers from the Baby Bells. But it's not as if the local phone business is a healthy market either.

"It's just the evolution of the industry," said Patrick Comack, an analyst with Guzman & Co. "Long distance companies are dinosaurs."

AT&T isn't going down without a fight. It is desperately trying to stay relevant. Two weeks ago it announced an agreement to resell wireless service from AT&T Wireless.

Problem is, we've been here before. AT&T spun off AT&T Wireless in 2001. Since then, they've shared a brand name but nothing else. So while Verizon, SBC and BellSouth have been able to stem some customer defections in the past few years by adding wireless subscribers, AT&T has not had that luxury.

The company is also said to be seeking partnerships with cable providers so it can resell broadband services as well. Too bad, then, that AT&T sold its cable unit to Comcast at the end of last year. In fact, Comcast is one of the rumored partners.

The spin-off of AT&T Wireless and the sale of cable assets were supposed to represent the end of former AT&T CEO Michael Armstrong's great bundling experiment.

To be sure, Armstrong's bold move to buy cable companies TCI and MediaOne may have made strategic sense. By buying near the market top, however, AT&T wound up bloated with debt. So it's hard to fault the company for asset sales -- there weren't many alternatives.

AT&T's balance sheet is clearly in better shape now with total debt of just $18 billion as of the end of March, compared to a debt load of $65 billion at the end of 2000.

Throw Ma Bell from the train AT&T isn't much cheaper than the Baby Bells, despite weaker fundamentals. Company  P/E*  2004 Est. EPS Growth.  LT Est. EPS Growth  AT&T  12.6  -25%  -2%  BellSouth  13.6  0%  7%  SBC Communications  16.0  0%  7%  Verizon Communications  14.2  1%  5%   * based on 2004 eps estimates  Source:  Thomson/Baseline

Still, it seems like AT&T is trying to put itself back together again, like Humpty Dumpty. It looks no more promising.

"It is really sad that AT&T now feels compelled to have access to wireless and cable," said Drake Johnstone, an analyst with Davenport & Co. "The company may have sold off its best assets."

Adding insult to injury, shares of Comcast (CMCSA: Research, Estimates) (where Armstrong is now chairman) and AT&T Wireless (AWE: Research, Estimates) are both up 32 percent year-to-date.

To be sure, there may be some value in AT&T as a takeover candidate. Rumors have continued to swirl about one of the Baby Bells acquiring it -- the equivalent of a child supporting their parents after they retire. Most recently, BellSouth has been linked to AT&T in merger talk.

At SuperComm, a telecom equipment trade show held in Atlanta last week, Ma Bell CEO David Dorman dismissed the chatter about AT&T being a takeover candidate. He thinks the company can survive on a stand-alone basis.

Some value investors argue that AT&T is cheap because it trades at just 9.5 times 2003 earnings estimates.

Don't be fooled by that. Analysts expect earnings to fall 25 percent in 2004. So using 2004 estimates, the stock trades at a P/E closer to 13.

In fact, analysts expect earnings to decrease at an average of 2 percent a year for the next five years. Let's see, how do you value that?

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"It's hard to figure out what P/E multiple to put on a company when you think earnings are going to decline forever," said Comack, who said the stock could fall as low as $11, about 40 percent below its current price. He bases that on a P/E of 7 times his 2004 earnings estimate, which he says is generous for a company with no growth on the horizon.

Johnstone points out that AT&T is trading at just a slight discount to the Baby Bells' 2004 earnings multiples. And he adds that the Bells are more than fully valued, given that they are only expected to post single digit earnings growth.

What's more, AT&T still is trading 20 percent above its book value, which is what the company's assets should be worth minus its liabilities.

All in all, Ma Bell is a stock that only a mother could love.

Analysts quoted in this article do not own AT&T. Guzman & Co. has performed investment banking for the company but Davenport & Co. has not.

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