Title: Drain Brain Essay, Research Paper

Research Article

I. Title: Drain Brain

II. Author: Scott Woolley

III. Article Summary: There has been a talent exodus from AT&T, even though AT&T is one of the best and largest companies in the United States. There are several problems at AT&T they are:

a: AT&T is no longer the regulated monopoly that it has thirty years ago, but it has a similar

dilemma: a massive pile of assets and an institutional reluctance to threaten those assets with new

technologies.

b. Nine senior executives have recently jumped ship. The talent is just as restless a few levels now:15,300 of the company?s 62, 000 Middle managers took early retirement last month, 50 percent more than the buy out plan was designed to attract

c. AT&T personnel need 17 approvals before a decision to be implemented.

d. Techies have been fleeing AT&T because they don’t want to be attached to obsolescent technologies.

e. David Isenberg, posted a devastating critique of his then employer on the Internet a year ago. The pamphlet entailed “The Rise of the Stupid Network,” chastised AT&T and other established telcos for not ditching their old technology. He compared them to 19th century sailing merchants who wrote “responded to the threat of steam by inventing faster sailing ships.”

f. As AT&T?s new boss, Armstrong a dilemma: How to embrace new technologies without obsoleting a huge fixed investment. ” People stuck with an existing system always find it harder to change, “But neither acquisition addresses the fact that the long-haul network itself is decrepit.

g. Ma Bell?s customers made 8.7% more cost last year than in 1996, but revenues brought goals calls work flat at $4.2 billion. Earnings, more than 90% coming from long distance, dipped 20% to $4.6 billion.

h. Long distance will be at 5 cents per minute by the end of the year, and that will still be artificially high compared to cost. Compare that with the prices AT&T now charges, in which typical consumer discount plans one 10 cents to 15 cents a minute.

i. By splitting AT&T stock into separate tracking stocks, Armstrong may free it from its slavery to earnings per share targets. The new capital structure isolates a steady earnings stream in one section of the business; the rest of the company is free to make bigger, riskier investments.

j. Does Armstrong have the means to keep the innovators?

IV. Critique/Opinion

The Company has become so depended on older technology that many in middle and top management have left to work for other companies, take early retirement or start their own businesses. AT&T is purging itself of its brightest and best talent, the big question is how should Mr. Armstrong stop the erosion of AT&T?s talent base? Mr. Armstrong should establish a system that will allow communication to flow down word to the employees. They also should establish a system to allow information to flow upward to management. Both systems would allow the employees to feel that company is concerned about them. Good communication between Mr. Armstrong and the company employees can help both management and labor function better as a team in completing the overall goals and objectives of AT&T.

Due to AT&T?s pricing system, over stock pile of assets and institutional reluctance to threaten those assets with new technologies the company has locked itself into the obsolete course and mind-set, which will be very costly to change. To correct this problem and bring the company into the 2001century, President Armstrong has taken a proactive approach by acquiring companies that have more modern technologies that will complement AT&T. Armstrong acquired TCI and Teleport Inc. To bridge the so-called last mile connecting its network to customs’ homes and businesses which was lost the old Ma Bell was broken up. Armstrong has begun to try to free the company from its slavery to earnings stock by splitting the stock into smaller parts to allow the company make bigger, riskier investments. I believe this is a very good move, the price for the more stable produce will continue to provide the needed revenue and he can work on those segments that are lagging behind.

Bibliography

V. Source: July 27, 1998 Addition of Forbes Magazine pages 44 and 45.