Q. Two years ago, I purchased 300 shares of AT&T Corp. They have lost more than half their value since then. Is AT&T worth holding, or should I sell this stock?
A. The longtime members of AT&T’s 4.8 million shareholder army have certainly seen fire and rain since the company’s initial breakup in 1984.
Most recently, shareholders approved a charter amendment lowering from two-thirds to a simple majority the vote required to authorize a merger, sale or major structural change.
This clears the way for the company to gain approval of a massive restructuring, with a vote expected in late summer or early fall.
AT&T (Ticker symbol: T) intends to split its four main units — consumer, business, broadband and wireless — into four separately traded companies that it expects will better be able to compete effectively in their respective areas. Each unit will use the AT&T brand name and share research and network facilities. This move, announced last fall, would dismantle $100 billion in acquisitions made over the past three years.
At the firm’s recent annual meeting, chairman and CEO Michael Armstrong, who joined the company in 1997, said the reorganization will “save AT&T from becoming a memory.”
Recent memory has been painful. The company suffered a first-quarter loss of $366 million as the economic slowdown affected all aspects of its business. It cut its dividend for the first time in its long history and its consumer long-distance business continues to erode.
Coming off a 65 percent decline in 2000, AT&T shares are up 25 percent this year. Some analysts consider its shares a bargain based on future potential, while others feel that the “pop” from the restructuring announcement is already reflected in the stock price.
The consensus rating on AT&T stock from the Wall Street analysts who track it is only slightly better than a “hold,” according to the Boston-based First Call research firm. That consists of four “strong buys,” four “buys,” nine “holds” and one “strong sell.”
Earnings are expected to decline 86 percent this year and increase 48 percent next year, compared to a 30 percent annual decrease in each of those years for the telecommunications industry. The company’s projected five-year annualized growth rate is 8 percent, compared to 12 percent for its peers.
In other matters, British Telecommunications and AT&T are reportedly exploring whether to form a separately listed global telecom company.
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Andrew Leckey answers questions Sunday in Business and Tuesday in Your Money. Address inquiries to Andrew Leckey, P.M.B. 184, 369-B Third St., San Rafael, Calif. 94901-3581, or by e-mail at andrewinv@aol.com.
