Word: stocking
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Dates: during 2000-2000
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...Wall Street wasn't smiling at this cheerful admission that Armstrong's strategy to turn Ma Bell into a vertically integrated communications giant had failed utterly. After last Wednesday's announcement, AT&T stock plunged 13%, to its lowest level in a decade. And it tumbled 5.5% more by week's end. David Lefkowitz, an analyst at Credit Suisse Asset Management, had some different advice for Armstrong's aunt, saying that AT&T stock is "probably dead money for some time." Salomon Smith Barney analyst Jack Grubman downgraded the stock for the second time in two weeks and declared...
...driving force behind the breakup is AT&T's conviction that at current valuations the parts are worth more than the whole. The official line is that the smaller, nimbler companies will be more profitable independently. "With their own resources and asset-based stock they can shape their own destiny and future," says Armstrong. But the plan also reflects AT&T's frustration that investors have been so focused on its evaporating long-distance business. The split is designed to force Wall Street to pay more attention to faster-growing parts of the company...
...With its control of the nation's phone grid, it was largely insulated from competition. That deprived consumers of choice. ("We don't care," Lily Tomlin's Ernestine the Operator used to explain. "We don't have to. We're the phone company.") It also made the company's stock such a sound investment that it became famous as the stock of choice for widows and orphans. Indeed, AT&T has 4.2 million shareholders...
Critics see the breakup as a capitulation to investor pressure to get the stock price up at any cost. Armstrong tried gamely last week to present it as consistent with his previous efforts. "Structure serves strategy, and at least in my view, our strategy has been consistent," he said. But not everyone was buying it. "AT&T made a big deal about creating an integrated communications company selling bundled services," says Salomon Smith Barney's Grubman. "That is being abandoned after less than two years of trying...
Reorganizing a company is a timeworn way of trying to change the direction of a stock without facing fundamental problems. "When you have a company under pretty severe attack from the outside and you exacerbate that with a disorienting reorganization, I don't get very optimistic," says Anna-Maria Kovacs, an analyst with Janney Montgomery Scott. She downgraded the stock even before the press conference...