The Des Moines Register from Des Moines, Iowa on April 6, 1986 · Page 54
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The Des Moines Register from Des Moines, Iowa · Page 54

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Sunday, April 6, 1986
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DES MOINES SUNDAY REGISTER B April 6. 1986 8F AT & T NEW YORK, N Y. (AP) - The earthquake of the Bell System breakup occurred more than two years ago, " but AT&T, its third of a million employees and its 87 million long-distance customers are still feeling the aftershocks. American Telephone & Telegraph Co. is faced with labor unions demanding job security. It is waging a $400 million campaign for long-distance customers. And during it all, it must make the transition to a new chairman. Long-distance service continues to be a money-maker for AT&T, but the company has suffered from declining rental revenue on communications equipment and slow sales of both phone equipment and computers. Revenues rose, but earnings slipped 1.6 percent in the final quarter of 1985, and Wall Street analysts recently lowered their earnings projections for 1986 and 1987. , Charles L. Brown, the chairman who led the company through its worst upheaval, thinks the government was wrong to break up AT&T in 1984. But he believes the worst is over. Brown retires in August. He discussed AT&T's past and its prospects in an interview last week with The Associated Press. "Momentum is Good" "Considering the trajectory that we have been on, the momentum is good and the company is in a good financial shape," he said. "There are a great many things that need to be done, but I don't think it's a question of requiring a reversal. I think the management team after I leave will be well-equipped to combat the problems and bring the company successfully along." Industry analysts expect that James Olson, AT&T's vice chairman, president and chief operating officer, , will succeed Brown in the top job, but Brown has declined to discuss the subject out of concern that doing so would limit his effectiveness in his time - remaining. , AT&T was the world's largest corporation when "Charlie" Brown, as he ; is known, became chairman in 1979. It had guaranteed returns on investment . and a near monopoly on the nation's long-distance telephone service. Today the Bell System belongs to Job cuts make security a key By PETER PERL '11 The Washington Part WASHINGTON, D.C. - After eight - years as a billing fraud investigator for Chesapeake and Potomac Telephone Co. of West Virginia, Cheryl Hoffer was confronted with a choice: Stay in her job and face a possible lay-' off, or uproot her family to transfer to a more secure job in Virginia with American Telephone & Telegraph Co. - Hoffer, a lifelong West Virginian, and her husband and son moved 472 miles to Virginia Beach, Va., in 1984 so that she could become a salesperson at a new AT&T facility. What she did not know then, however, was that AT&T would close the Chesapeake customer service office two years later. On March 1, she was laid off after 10 years of service. "I have been betrayed. I feel betrayal, hurt and anger," Hoffer said recently. "I have a very, very close-knit family, and leaving my home, my family, my church, was very painful. I had the impression if I moved, I would have a job until the Lord came. ... I thought the phone company was forever. Well, the phone company is forever. But they don't need me." Hoffer is one of the casualties of the telecommunications wars that began with the historic 1984 breakup of AT&T, once the nation's largest company. She is part of one of the largest dislocations of industrial workers in INSIDER TRADING Here is a list of insider transactions in Iowa corporations as reported to the Securities and Exchange Commission for the period Dec. 11, 1985, to Jan. 10, 1986. Certain transactions do not include prices. Arts Way Mfg. Inc. James Lawrence Koley. director, sold 6,500 shares at 98 cents a share in a December transaction, lowering direct holdings on reporting date to 26,000. Iowa Illinois Gas ft Electric Nancy L. Selfert, director, purchased 125 indirect shares in a September transaction and acquired 20 indirect shares accrued through a plan in a December transaction, increasing her indirect holdings on reporting date to 929. Her direct holdings on reporting date were 300 shares. General Growth Props. John Hawkinson, an affiliate, disposed of 2.592 indirect shares in a September transaction reported late to the SEC. eliminating indirect holdings on the reporting date. Stanley Richards, officer, disposed of 1,166 direct shares in a September transaction reported late to the SEC, eliminating direct holdings on the reporting date. Joseph F. Rosenfleld, an affiliate of the company, disposed of 1,253 indirect shares in a September transaction reported late to the SEC, eliminating indirect holdings on the reporting date. Hawkeye Bancorporation William A. Krause, director, sold 236 indirect shares at $2.67 a share in a December transaction reported late to the SEC, lowering indirect holdings on reporting date to 149.244 shares. His direct holdings were 68.150 on reporting date. Theodore M. Seldin, director, purchased 5.000 direct shares at $3.13 a share in a December transaction, increasing his holdings on reporting date to 19,504 direct shares. fS) chairman looks at it v N T 1 V I 1 Charles Brown Retires in August history and a shrunken AT&T with less than a third the assets of its predecessor is battling a host of competitors in long-distance service, communications equipment and computers. Shaken By Breakup Brown, 64, whose first job with AT&T was summer construction work in Cleveland during the Depression, was shaken by the company's breakup, as were many other career employees. He described the event in the latest annual report as "the most shattering reorganization in business history." On Tuesday, Brown said, "I have said and I still believe that it was not necessary to break up the Bell System. Most people now think it was a bad error. I'm not inclined to look back, but it was not the finest hour of decisionmaking in the United States." For himself and other AT&T employees, "It was an exceptionally traumatic experience both physically and emotionally," Brown said. Nevertheless, he said he was proud that the divestiture was accomplished with almost no disruption in service, aside from long delays in 1985 in installation of private lines. Insiders say Brown probably looks forward to retirement After August, he said, he plans to sit on various boards of directors and polish his tennis and golf games. recent years, a shakeup that will be a major topic in nationwide labor negotiations that opened here Wednesday between AT&T and two major unions, the Communications Workers of America and the International Brotherhood of Electrical Workers, representing 200,000 workers. 50,000 Jobs Cut More than 150,000 workers have been transferred and more than 50,000 jobs eliminated in the breakup of "Ma Bell," which historically was the model of stability because of its nationwide monopoly. The unexpectedly large volume of layoffs and transfers has contributed to a growing fear over job security in highly competitive, unregulated industries such as telecommunications. Cases such as Hoffer's are a "rare exception" but are unavoidable when corporations are confronted with the "monumental task" of reorganizing a million-worker empire, said AT&T Washington spokesman Herbert Lin-nen. "If there are horror stories, they are an aberration. Our objective has been to keep layoffs to a minimum and spare people this kind of misery." AT&T, forced to cut jobs, has minimized layoffs by inducing older workers to retire early, offering up to $22,000 in cash, continued medical Heritage Communications Kenneth E. Westerbeck, director, sold 100 direct shares at $21.63 a share in a December transaction, reducing direct holdings on re porting date to 750. HON Industries Inc. Max A. Collins, officer, disposed of 34 direct shares by gift and sold 9,646 direct shares at $30.75 a share in two Oecember transactions lowering his direct holdings to 2,062 on report ing date. Collins sold 1 5.354 indirect shares at $30.75 a share in a December transaction lowering his indirect holdings on reporting date to 2,062, also. CyCare Systems Inc. Ronald Edward Gray, officer, acquired by exercise of warrants, options and rights 6.000 direct shares at $11 a share and acquired through a plan 574 direct shares in two De cember transactions, increasing holdings to 19.400 direct shares on reporting date. Gray purchased 450 indirect shares at $21 a share in a December transaction, increasing indirect holdings on reporting date to 950 shares. Iowa Southern Utilities Co. Robert F. Brewer, director, acquired 1.412 direct shares in a September transaction reported late to the SEC. bringing his direct holdings on reporting date to 7.133 shares. Brewer disposed of 1,412 indirect shares in a September transaction reported late to the SEC, which decreased his indirect holdings to 1.703 on reporting date. Mid America Publishing Wlllard D. Archie, director, acquired 6,000 direct shares in an October transaction reported late to the SEC, increasing direct holdings on reporting date to 33,296 shares. Pioneer HiSred John P. Wallace, director, purchased 13,973 direct shares at $35.50 a share, and purchased 1 .841 indirect shares in two December transactions. Kenneth Leon, an analyst for L.F. Rothschild, Unterberg, Towbin, praised Brown's leadership during divestiture, but said the chairman "can be considered a traditionalist. Whereas Mr. Olson, we don't know yet what his management style will be. He has a higher energy level than Mr. Brown, a different flair. It could be Peter the Great moving AT&T out of the Dark Ages." Tougher Company Brown aims to leave behind a company that is not just smaller than the old AT&T but quicker, tougher and more in control of its own future. "It is largely free of the court and legislative and regulatory hassles of those pre-divestiture days," Brown said. "We now have the initiative in our own hands. "The main job in the next few months is to maintain the momentum that AT&T has achieved in earnings, volume and cost reduction," he said. AT&T began bargaining with its unions Wednesday in the first formal contract talks since 1983, before the breakup of the Bell System. Job security is expected to be a major issue; the company has eliminated about 56,000 jobs since the breakup, more than 27,000 of them through layoffs. The contracts expire May 31, and both sides are sounding more militant than they did in pre-divestiture days. Also, Brown still must shepherd AT&T through the final months of "equal access" voting, in which people are choosing which long-distance phone service they want to reach by dialing "1". Most of the nation's residential phone customers will have chosen by Sept. 1. Market Share AT&T has done surprisingly well in the equal-access sweepstakes so far, in spite of spirited competition from MCI Communications Corp. and GTE Corp.'s Sprint, among others. AT&T had just under 79 percent of the long-distance market at the end of 1985, not far from the 91 percent it had at the time of divestiture, estimate Mary Johnston, an analyst for. the Yankee Group in Boston. "I'm reasonably satisfied that we've done a good job in that market," taking into account the cost advantage the competitors have had from not coverage and other benefits that make early retirement attractive, AT&T Vice President John Ruf e told a House subcommittee that recently examined the impact of divestiture on consumers and workers. Although AT&T cut 56,000 of its 380,000 jobs, the company said that early retirements and transfers to regional Bell companies kept layoffs to about 15,000. This effort, combined with relocation and job search assistance, Ruf e said, showed that AT&T's "downsizing efforts are as fair and as humane as we can make them." Union Wants Guarantees But the 650,000-member CWA, the world's largest telecommunications union, contends that AT&T and the Bell companies must do more to guarantee jobs to veteran workers in an industry that generated a profit of more than $1.5 billion for AT&T last year and a SI billion average profit for each regional Bell operating company. CWA's prime demand involves improving the training, retraining and relocation programs that allow workers to retain employment even if their jobs are eliminated by automation or business fluctuations. CWA will also seek reductions in subcontracting of work to new non-union companies that are receiving jobs formerly done by union members. "The people who built the world's best telephone system are being tossed onto the economic scrap heap while the telecommunications industry pursues higher profits but provides lower quality of service to consumers," CWA President Morton Bahr told the House oversight hearing. He called on government to try to add worker and consumer protections to the 1984 federal divestiture order. Bahr said consumers suffer because there are "fewer workers to take TREASURY BOHDS. ROTES NEW YORK (AP) - Over Treasury bonds, weekly high, I net cftenga from Itot previous the-Counler U.S. Government tow and dosing asked prices. Ins wet s aosMig ewea pro ana .Prices m doaars and 32ndv Sublet lo Federal tun but not awe income mils lJb5 lw1?- Ml me n. warn Memrwv hh low Last cm ntkj T)s apt .. imTsiJoTjiooiT-y ilo k fc ft isto it, j $ 2s May iSU n... 10M1 IOC I00.M - J i H Mar I9M n... 100.29 100.2a 100.2a - 1 144 is Jun IMa... .. ... 10i.lt lOill 101.14 - 1 fS k IS ttfc: ' If III ! s Aug Mn HM H 100 17 MO II .1 ijl Its Aug 4 ... .. 01.2a 101 23 101.23 - J 2.34 74 Aug 19J4 p.. 02 1027 TO 7 3 e.SI fe SsEE ifefc S oXs Nov '$le p"."l niSwijt.J : 0s Dec W n I 102 To 102 II 1 lu 'Ml Jen 1WT p. .. . nj W IM.jj jl4 1.8 Ji fit Sit". :L ibm i:f t j f75 0i Feb I n. ffl.lJ M3.M W3 1 .. 476 t Feb m ... ... 1 104.31 104.31 - J a SS ;:::: MUMti H 5S Apr m p... . 03 1 10JJJ 103.1 .4 474 Vts Mov l7 p... g.ll Il4 la .4 4 Irf J Hi I Q'lS Jun IM7 . .. 104 104.7 ml i i 414 Jul mf p... 02.17 10214 102 14 .4 fit j&tjfe nil I 2Hs Jan Ittll 06.31 101 S lOt ij - . 4.91 !' Feb m n 8.IJ IK. 2 1 i J 4.94 m Feb vm mx ms !a g Js FMer W$ M'-'-' 49$ (Js Mar wSVr-'L. 01 10013 IS II .' 1 tfi 3V4 Apr t9WH.. . I) 1.24 II ill 11 J.a i 4.W "as May Ml n... pj . 1 i .70 its May M n l&N lM.ll kK.ll .7 In company's past, future AT&T at a glance Employ set 337,000 Stockholders .2.9 miflion Stock mrqt $19.87 to 28 37" Income statement Quarter ended Dec. 31 Annul In miuona loapi p thare figure 198S 1984 Revenue $9,120.00 $8,411.00 Nat earnings $ 364.00 $ 370.00 Per share $ 32 $ .33 Year ended Dec. 31 198S 1984 Revenue $34,909.00 $33,187.00 Net earnings $ 1,557.00 $ 1,370.00 Per share ....$ 1.37 $ 11 as of Dec. 31, 1985 52-week range having to pay the full cost of access to phone companies' networks, Brown said. In another area, Brown said he expects AT&T's ability to serve large customers will improve as a result of the government's allowing its two big divisions, Communications and Information Systems, to present unified packages of services and equipment to customers. Even though Brown said the issue of divestiture "is largely behind us now," AT&T is still feeling some tremors: Profit margins on its lucrative long-distance services for big business are likely to erode. MCI, with the backing of part-owner IBM, and GTE Sprint are targeting the market, and big-business customers have realized they can demand more for less. The "Baby Bells" have shown a new willingness to go elsewhere for the communications equipment they traditionally bought from AT&T's Western Electric. Northern Telecom Ltd. of Canada has become a strong No. 2, and Siemens A.G. of West Germany is bidding to break in as well. Domestic demand for switching equipment is likely to sag once most companies have installed digital switches. But foreign markets, where AT&T hopes to expand, are dominated by strong competitors such as Siemens, ITT Corp., Japan's NEC Corp. and Sweden's L.M. Ericsson. Computers continue to cause issue in phone talks orders, test lines, perform repairs, answer billing questions, plan facilities, install new service and do other needed work." Remaining workers , are hit by "layoffs, downgrades, pay cuts, multiple moves and transfers . . . and an overall climate of confusion and shattered morale" that affects phone service, he said. Company Cites Costs But AT&T said that CWA is exaggerating the extent of the problems, and the company believes that job security is best attained by reducing labor costs, which in some job categories exceed those of non-union competitors by 20 percent to 30 percent. AT&T's average yearly wages range from $21,300 for phone operators to $31,700 for skilled technicians. "If you pay much more than your competitors, that is the problem of employment security," Linnen said. Bell Atlantic and other regional companies have had more stable employment, industry analysts said, because much of their business is the regulated local telephone service. But AT&T now not only competes for long-distance telephone service and sales of telephone equipment, but it also takes on giants such as International Business Machines, Xerox and others in the lucrative field of business communications. With its once-dominant position undercut by domestic and foreign competition, AT&T is still "downsizing." It has closed 150 of its 600 "phone centers" and more than 25 of its large customer service centers that handle sales, service and complaints. Cheryl Hoffer, 30, thought she could avoid that "downsizing" when she moved from West Virginia with her husband Al, a building contractor, and their 8-year-old son, Shae. "I gave my job everything I had," she said. "Most everyone did. We were 4s lOlM bef Ms Sao lS Nov ni Nov s AM UiS BS 144 Jan Feb ls Fet as May 1s May as Jun Z ft bs Sen ll' Oct igus 11 Dec 74t lO'it Jan ivn t- Is Fab s Mar O'it Aor l'.s May s may us Jul x 'is Oct as Nov ?Us Jan RiTSV M May 4'tt May 45s i"1 I4S NOV ins Jan m feb Apr :s May s jui m t. 4'As Aug 17-I. 0's Nov 1992 .. Alia 19 n 107 U1D79 M7 17 4- I 7H m n Ill 2i 111.24 111 .8 4- i m m p.- 109 17 101 .1 7.09 ;.:r Ilp!i: J 19 n 11.1 1.7 ill 14 1 7.22 1949 p. I I ft 1l 4.94 it-: IHllli j 1 SS fflfcr M fit- WO n 1114. J J 21 12 4 J . Iy90p.. WjlWf 1 .1 .2 19 .. 12 20 12.14 112.20 .11 jfl ,8?.":::- i9 ... 2 2 fit nr i .3 'wi " ill If h ll H im n no s 130 130 in ; a 114.21 114.12 14.20 .11 7.3 -- mm h I 5 IMs Feb 71M Apr ip'vs May. Mat Aug TO .. n i 7i a utm i n headaches. Far from challenging IBM for supremacy in information processing, AT&T has hemorrhaged money in the field. Its 6300 Series personal computers have won only about 6 percent of the PC market However, Brown points out that AT&T sold more PCs in its first 18 months in the business than IBM did In the first 18 months after entering the PC market in 1981. The regional Bell holding companies are trying to break down the barriers that have kept them out of equipment manufacturing and most interstate long-distance service. If they succeed, AT&T could find that its Baby Bell offspring are some of its toughest competitors. "Long-distance is their cash cow, but can they get the rest of their house in order?" asked the Yankee Group's Johnston. Regionals Bigger AT&T fell from first to eighth place on the Fortune 500 list after the Jan. 1, 1984, divestiture of its 22 wholly owned Bell System companies. Combined, the seven regional "Baby Bell" holding companies that were formed in the process Nynex, Pacific Tele-sis and the rest are far larger in sum than their former parent Even so, AT&T continues to have 2.9 million shareholders, making it the most widely owned stock in the world. It remains, as before, a stock held by people who count on its clockwork dividend: more than half of its owners have fewer than 100 shares. Most shareholders don't seem to realize that AT&T is far smaller than it was before the breakup and far more dedicated to growth by internal reinvestment, said analyst John Bain of Shearson Lehman Brothers Inc. AT&T's 30-cent quarterly dividend is unlikely to be cut, but it is also unlikely to rise for quite some time, Bain said. AT&T brought the world the telephone, the transistor, the solar cell, the laser, sound motion pictures and high-fidelity recording, the company notes in a recruitment advertisement aimed at college students. The challenge now is to make money. AT&T still has vestiges of the mo- loyal and we trusted them. Now they are laying us off and hiring people off the streets. People have no idea what they are doing And I believe the consumer is really suffering." Seniority Rules Phone company transfers depend on union seniority rules, a system that usually saves jobs for veterans but sometimes offers little help, workers said. Hoffer was caught by AT&T's consolidation of its offices, and her only alternative was transfer to a part-time job in Roanoke, which she declined. Jane Hayden of Newburg, Md., and Steven Conrad of Richmond said they also have learned the hard way about AT&T's ever-changing needs because of opening and closing offices. "Since divestiture, I have worked at Mechanicsville (Md.), been loaned out to Landover (Md.), transferred to Herndon (Va.), loaned out to Arlington (Va.). Four different offices in the last two years," said Hayden, a 17-year veteran storekeeper who complained about being forced to make a 124-mile round-trip daily commute that frequently takes more than four hours, between her home in southern Charles County, Md., and her current job across the Potomac River in Herndon. "They are closing offices, trying to serve the public out of these central locations. And they don't know if the customer is not getting the services," she said. "There used to be phone company storerooms with an abundance of equipment in a 10-mile radius. But they are closing them all over If we need a piece of equipment for an emergency, we got to wait for it or drive all over the place to get it." Conrad, 32, an eight-year veteran, went to work for C&P Telephone in Newport News, Va. Conrad transferred to Norfolk but then was "bumped" from his job. May Ro7 Am Us a ' .F . a on u. a. itlien examM from w Imoldmo tatat. n Traa- lak lory note, p ' raasurv not. and nan Ui. alien exempt tram MM .T"rr Bf fOTIJ. ls Nov 1993 n jpp mi m. .f Its M?y rfW-94 " flS tl.J J." 1 Jl 'u May 1994 34.) 1M.J1 IB. i 1.2 iff if'-- Vfn Feb mi . . 114 1I.J9 ill 2 .1 II Ike mm i'rz Aug Wr.r 20.11 19 It ft II 1.4 Ws Nov 1995 p. kl lj U 15 1.11 W.- IS Ifillfili: 3VW May 7001 41 24 144.: 44 .! 1 1 jp ! ilfk pip1 ll'Sk" lllll'j ,'4,1 Mi ?0 Mk 171 71 1M U 170 U 4-1 U Cl Long-distance market share (in porcent) 100, lags total market 148 65 billion 78.9 "'m-- 62 104 27 1 ATT MCf GTE ALC" U.S. OTWEW SBS SPRINT TELECOM Doetnl includa long-distance calls within local telephone company territories. " Merger between Allnet Communications Services Inc. and Lexitel Corp. SOURCE: Yankee Group nopoly mentality and is not as good at salesmanship as, say, IBM, said Ken Zita, an analyst for Tetra Communications in New York. Business Sense "The have to translate their technology into practical business sense. They can't captivate the business world with ideas," Zita said. Typical of a regulated monopoly, AT&T carried huge debt at the time of divestiture, and it needs to continue paying it off to compete with companies such as debt-light IBM, said Fred Litwin, another Tetra Communications analyst. Brown noted that AT&T's debt-to-equity ratio has been trimmed to 36 percent today, from 42 percent at the time of divestiture. The company's 1.6 decline in earnings in the last quarter of 1985 was the first such decline since the Bell System breakup. The earnings were $364 million, or 32 cents a share, versus the year-earlier $370 million, or 33 cents a share. Revenue rose 8.4 percent, to $9.12 billion, the highest since the breakup. L.F. Rothschild's Leon recently lowered his 1986 estimate of earnings per share to $1.50 from $1.90 and his 1987 estimate for 1987 to $1.70 from $2.15. PUCES fi FACES Patricia R. Meyer Patricia R. Meyer has been named president of EMC Premium Services Co., a subsidiary of Employers Mutual Casualty Co., Des Moines. Mever. who A Nw . had been vice presi- I ' -'TN dent W'N continue f i -i - - LJ as premium services patrkia n. manager and assis-meter tant secretary of Employers Mutual Casualty. Lawrence V. Durland Jr. Lawrence V. Durland Jr. has joined Equitable Life Insurance Co. of Iowa as vice president and chief financial officer. Prior to joining the company, Durland had been a life insurance consultant for Towers, Perrin, For-ster, and Crosby in LAWRENCE V. DURLAND JR. Milwaukee. First Interstate Richard Bro has T " been promoted from vice president to senior vice president. data processing, Jor First Interstate Information Systems of Iowa Inc., Des Moines. Bro joined First Interstate in 1974. Claude Dawson was named se- ninr v!a nHeiilawl Of bankine oneratinno. namnn mkn has been associated with First Inter state since i960, had been vice president. Larrv Clam has hum senior vice president of marketing. sjiaus joineo. r irsi interstate in 1979 and was named vie nrpuiriont nf mar keting in 1982. CLAUDE DAWSON Peg Courier Peg Courier has been named vice president of market- 4 ing and public rela tions for the Better Business Bureau, central and eastern Iowa. Prior to joining the EBB, Court-er was associate producer and pro PEft COURTER duction manager for Mark IV Pictures, ""ST C iff 171 RICHARD man tdkvta id iLl LARRY CLASS r v i on Des Moines. wimnownt

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