AT&T; Finishes Restructuring With NCR Spinoff

AT&T; Corp. closed a chapter in its history with Tuesday’s spinoff of NCR Corp., completing the restructuring that broke the company into three: a phone service, an equipment maker and a computer company.

The $3.4-billion spinoff ends a frustrating experience for AT&T.; It bought NCR for $7.48 billion in 1991 and failed to mesh the companies’ expertise in computers and communications. NCR’s chronic losses dragged down AT&T;’s profits, and NCR’s own value fell by half under AT&T;’s ownership--even after AT&T; pumped $2.8 billion into the maker of computers, automated teller machines and electronic cash registers.

The spinoff, effective at the close of trading Tuesday, was the final leg of a restructuring AT&T; began 15 months ago when it said it would make NCR and its phone businesses separate, publicly traded companies. It spun off equipment maker Lucent Technologies Inc. in September.

That leaves AT&T; a phone and credit card services company with $50 billion in annual sales. It faces the daunting task of increasing its core long-distance phone business, while simultaneously expanding into new markets such as Internet access and local and wireless phone business.

The coming year “is going to be critical for AT&T; to position itself as an integrated service provider,” said Frank Governali, an analyst at CS First Boston. “We need more evidence of their ability to move with more speed and nimbleness.”

That could be tough. AT&T; is losing customers to small companies such as Excel Communications Inc., which aggressively markets its long-distance services through independent sales representatives. In addition, the growth in long-distance time on its network has slowed. AT&T; shares have fallen 6.1% this year, while the benchmark Dow Jones industrial average has risen 27%.

Moreover, AT&T; faces bigger challenges as it goes head-to-head against the deep-pocketed regional Bell companies, which are expected to enter the long-distance market in 1997.

“In AT&T;’s core business there is a lot of improvement they need to target,” Governali said. “AT&T; still has the best combination of assets in the industry. They really need to work on exploiting the value of those assets.”

Analysts generally view AT&T;’s breakup as a success. Lucent shares soared after the company boosted sales and profits by selling its equipment to AT&T;’s competitors.

Under the largest initial public stock offering in U.S. history, Lucent sold 112 million shares at $27 each in April, netting AT&T; $3.025 billion.

Under the NCR spinoff, AT&T; shareholders will get one share of NCR for each 16 shares of AT&T; they own. Based on 1.62 billion AT&T; shares, NCR will have about 101.4 million shares outstanding.

NCR shares, trading on a when-issued basis pending the spinoff, fell $1.50 to $33.625. AT&T; shares are expected to trade about $2 lower Thursday because of the spinoff. They fell 75 cents to close at $43.375 Tuesday. Both trade on the NYSE.