AT&T will split into three companies in the biggest corporate breakup in history, the telecommunications giant said Wednesday.
The new strategy will bail the company out of its ill-fated attempt to get into the computer business and focus on long-distance communications and its credit-card business.The three new companies will be publicly traded and turned over to AT&T shareholders. The company said 8,500 jobs would be lost from its computer business, but it didn't say how many jobs would be cut from its overall payroll of 303,000 employees.
AT&T's shares, the nation's most widely held stock, shot up about 10 percent Wednesday morning, rising $5.75 to $63.371/2 after the news was announced.
"Changes in customer needs, technology and public policy are radically transforming our industry," said AT&T Chairman Robert E. Allen said after the company's board approved the breakup at a special meeting Wednesday morning.
Based on the company's size with annual revenues of $75 billion, the breakup ranks as the biggest ever, easily eclipsing its previous government-ordered breakup in 1984. That ended the nation's long-distance telephone monopoly and ushering in the era of MCI and Sprint competition. Eleven years ago, the company's revenues totaled $70 billion, including what are now the regional Bell companies.
AT&T said its telephone business, credit card company and wireless communications operation - formerly McCaw Cellular Communications - will remain one business under the AT&T name.
The restructuring amounts to an admission by AT&T that its efforts to combine communications expertise with computing technology has failed. The company bought NCR Corp. four years ago in a bid to enter the computer business.
Each of the new businesses would focus on three areas of specialty - communications services, communications equipment and computing.
The costs of the breakup will reduce the company's earnings this year by $1 billion.
AT&T said it doesn't expect the plan will need approval from regulators or the court that oversaw its split into seven regional telephone companies 11 years ago.
The company plans to revamp its NCR business - which had been renamed Global Information Solutions - to focus its attention on customers in the financial, retail and communications businesses.
As part of the restructuring the subsidiary will stop making personal computers, AT&T said. About 8,500 of the computer business's 43,000 jobs will be cut as part of its reorganization, but the company said many employees will have opportunities to find work elsewhere in the company.