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PRESENTATION ON CASE STUDY. BY, MEGHNA DIXIT PRANAV TRIVEDI BISWAJIT MODAK
FACTS : SEPTEMBER 20. 1995 AT&T announced to split into three companie (ANNUAL REVENUE $75 BILLION) AT&T LUCENT TECHNOLOGIES GLOBAL INFORMATION SOLUTION BUSINESS .
S. etc. telecommunications industry.REASONS FOR THE SPLIT : Impending deregulation of the U. Deregulation of many foreign telephone markets. . Privatization of state-owned telephone companies around the world. Rapid changes in the telecommunication business such as new technology.
AT&T’s computer business was unable to establish a profitable computer operation: loss of billions of dollars trying to establish a presence in the personal computer market through an internal new venture(1980) acquisition of NCR turned out to be a disaster .Issues Performance of computer & network businesses suffered as a result of association with AT&T tried to sell products to MCI . Sprint and RBOCs. As a result the customers were reluctant to purchase from the supplier’s competitors.
Current scenario No direct access to its customers Used the phone lines of local phone companies to originate and terminate calls for its long distance customers As a result: had to pay a termination fee (35% of the cost of every for every phone call made) routed through their lines to the local phone companies .
so. AT&T concluded that it would not be able to generate sufficient income from these assets to cover the cost of additional debt . with billions more needed to be spent.Facts after new takeovers Cable strategy did not work out as planned It would cost billions of dollars to upgrade the cable TV systems in order to handle the phone calls. AT&T took on $56 billion in debt to finance the acquisition of TCI &Media One .
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AT&T Global Information Systems has seen performance fall even further since the breakup. Lucent Technologies had an early period of high performance. which has dampened somewhat as demand for networking equipment is down.How might the breakup create value for shareholders? The breakup created some value for shareholders. On the other hand. . AT&T has done well.
its new strategy had to respond to the new opportunities and threats. AT&T’s old strategy became obsolete due to the dramatic changes in its environment . thus.Does the 1995 breakup imply that AT&T’s pre-1995 strategic vision was seriously flawed? AT&T’s strategy needed to change because its operating environment had changed drastically.
why did AT&T reverse course and sell off its cable assets in 2002? How might AT&T have handled this whole episode differently? AT&T’s decision to sell their cable assets came about because revenues from broadband did not grow as fast as anticipated.Was the strategic rationale for acquiring TCI and Media One sound? If so. When expenses appeared to be high and revenues low. Many shareholders believed that it was a mistake. due to low consumer demand. and thus decided to sell. Also. AT&T may have been unwilling to make the capital investment necessary to fully implement their strategy. the company was put under pressure from investors to raise short-term profits. .