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AT&T = America, Troubled & Traumatized?

Have the company’s misfortunes weirdly presaged the U.S. economic downturns?

May 3, 2001

Have the company's misfortunes weirdly presaged the U.S. economic downturns?

By the end of 1999, once high-flying AT&T had accumulated $66 billion in debt — about the same volume it had in sales. This makes one wonder: Does AT&T really stand for American Telephone and Telegraph company — or rather Always Troubled & Traumatized? And perhaps more strangely, have the company’s misfortunes somehow oddly presaged the U.S. economic downturn. Our new Read My Lips looks at a telecom company in turmoil.

Mr. Armstrong, what struck you when you took over AT&T?

“I couldn’t figure out where decisions got made at AT&T. This place was impossible. We used to say there was one stop shopping at AT&T — any one manager can stop anything.”
(CEO Michael Armstrong, on ineffectual decision making at AT&T under former CEO Robert Allen, May 1999)

How did things change?

In his first 18 months as chairman, AT&T’s Michael Armstrong announced $130 billion worth of acquisitions — an amount equal to 71% of AT&T’s market capitalization at the time. (Washington Post)

Was that the right decision?

“The alternative today, had we not done what we did, was extinction.”
(Michael Armstrong, CEO of AT&T, on why he separated the company into four pieces, February 2001)

What did the markets say?

Since its high of $61 a share in March 2000, AT&T’s stock has dropped by 66%, to $21 a share by February 2001 — losing over $160 billion in market capitalization in the process. (

How was working for AT&T in the good old days?

“If you came to work at AT&T 30 years ago, you knew two things. You wouldn’t get rich, but if you did a good job, you’d have an assignment until you retired. Now, even if you do terrific work, you don’t have a guaranteed job for life, but you can make a million dollars.”
(AT&T spokesman, on new forms of corporate life, including his early retirement bonus, May 1998)

How much did it grow over the years?

“AT&T is like a small country.”
(AT&T director, discussing the size of the telecommunications firm, February 1996)

How did the old leadership fail the company?

“The only thing Bob Allen and his managers know how to do is turn out the lights.”
(Former AT&T manager, criticizing the strategies of AT&T’s former CEO Robert Allen, February 1996)

Why did AT&T collapse so dramatically?

Between deregulation in 1984 and 1996, AT&T’s share of the U.S. long-distance market fell by one-third — or 34%. (Washington Post)

How could it come to that?

“What have we done right over the last several years? Name one thing.”
(Frustrated AT&T manager, on the billions of dollars AT&T has invested in losing ventures February 1996)

What happened to the average guy who worked for AT&T?

“You should see Dayton right now with AT&T pulling out. Families are breaking up, people are losing their homes. Bob Allen has wrecked a community.”
(Former executive at the AT&T-owned NCR’s Dayton, Ohio plant, expressing frustration at the company’s downsizing efforts, February 1996)

How many people left AT&T in 1998?

Twenty-five percent of AT&T’s 62,000 middle managers took early retirement. That was 50% more than the buyout plan was designed to attract. (Forbes)

Why did they want to leave so quickly?

“I left because you needed 17 approvals for a decision.”
(Tom Evslin, founder and former head of AT&T’s Internet access division WorldNet, July 1998)

Wasn’t that like a stampede?

“Not everyone is going to be allowed to leave. We do need to run a business here.”
(AT&T pension administrator, on whether AT&T will meet its goal of enticing 11,000 managers to retire, May 1998)