Chapter 4 Chapter 3
Excluding antitrust as the reason for AT&T's decline, we have to look elsewhere.
In 1995, AT&T reached a watershed moment.Since 1994, the U.S. economy has fully recovered. As can be seen from the trend chart of the S&P 500 Index below, the U.S. stock market began to skyrocket from 1995 until the end of 2000.
At this point, AT&T equipment manufacturing executives shortsightedly suggested a split.Their reason seems to be reasonable, because AT&T competes with two other long-distance telephone companies, MCI and Sprint, and the latter refuses to buy AT&T's telephone equipment.But this kind of one-time sales increase obviously means little to a company's long-term growth.Countless managers and employees at AT&T have seen this.I went through that AT&T split firsthand. In the summer of 1996, Bell Labs was divided into two. Everyone moved from the building in Murray Hill to the Frenham Industrial Park, and they talked about the separation of the family every day.Many felt that leaving AT&T, which had stable revenues and profits, might not be worth the cost of the device division for MCI and Sprint's markets.A few years later their prophecy came true.But at the time, even if AT&T executives were aware of it, they didn't have absolute control over the company. Several AT&T executives hold far less stock than Wall Street investment banks control.To put it bluntly, the CEOs of AT&T don't really own the company.There are many visionaries among them, but they can't influence the board of directors at all.What's more, the long-term interests of the company have little to do with them.If you can make a fortune during your tenure, why not do it?As investment firms on Wall Street, what they care about is when their stocks can double.1995 was an opportunity. The overall stock market was booming. At this time, if the equipment manufacturing sector and the telecommunications service sector were separated, the stock of the former would definitely soar.Wall Street sees it, the company's bosses know it, and the company's heavily owned employees know it.Everyone was sensible at first, but they were blinded by profit.A separation of chickens and eggs began.
AT&T will be divided into three parts, AT&T in the telecommunications business, Lucent in the equipment manufacturing business and NCR in the computer business. NCR is smaller, let's not mention it for now.The separation of Lucent from AT&T is definitely the first major event in the history of world telecommunications.In February 1996, Lucent was listed by Morgan Stanley, the most famous investment bank on Wall Street, raising three billion US dollars in cash, which became the largest listing in history at that time and the eleventh largest listing so far. Activity.When Lucent went public, its market capitalization reached 18 billion yuan.
As expected, MCI and Sprint came to buy Lucent's equipment.Lucent's sales are significantly higher than when it was part of AT&T.Soon, the stock price doubled and soared, while AT&T's stock was still slowly climbing at the original unpleasant speed during the same period, which was exactly what Wall Street and everyone expected.The National People's Congress on Wall Street made a lot of money, Lucent's senior officials made a big deal, and employees with equity shares made a small deal. In 1999, I met many Bell Labs scientists at a conference. When talking about stocks, they were all in high spirits and smiling.Before the stock market bubble burst in 2000, Lucent's stock had grown thirteen times in four years, with a market value of $244 billion.
However, these scientists also faintly feel some crisis.The original Bell Labs never worried about its own funds because of the big backer of AT&T.Now, Lucent's profits are not enough to feed a giant laboratory with 20,000 people, and it begins to ask the scientists and engineers there to develop research that can make money as soon as possible. (I will talk about the disadvantages of such a large laboratory as AT&T in the future) Bell Labs is no longer a research-based place in the past, and its innovative ability no longer exists. From 1995 to now, Bell Labs There is no more invention that caused a sensation in the world.Originally, AT&T's telecommunications services and equipment manufacturing complement each other and are a win-win combination.Separation is not good for the long-term development of both parties. The decline of AT&T and Lucent began at this time.
The sales boost from MCI and Sprint was almost a one-off.Wall Street has factored in that revenue when forecasting Lucent's earnings.For Lucent's stock to continue to grow, it must consistently beat Wall Street's expectations for sales and profits. (Note: Generally speaking, the current stock price of a company has already reflected the profitability of the current and a few years later. If you want the stock price to grow rapidly, the company's profit must be higher than everyone's expectations) In fact, Lucent can't do this at all. a little.In order to be able to support a high stock price, Lucent took a risky move that was later proved to be a failure.During the Internet bubble era, when countless small and medium-sized companies were rising and large companies were expanding, Lucent decided to "promote" its telecommunications equipment.The specific method is that Lucent lends money to various companies to buy Lucent equipment.As long as the equipment is shipped out of Lucent, it is included in the sales in the quarterly financial statements.If you read its financial report carefully, people can find that Lucent always has a large "account receivable", which has never actually entered Lucent.After the Internet bubble burst two thousand years ago, all companies that borrowed money to buy equipment went bankrupt, and Lucent's "accounts receivable" suddenly turned into a net loss. In 2001, Lucent had to close almost all of Bell Labs' research divisions.Only one or two laboratories were left symbolically to keep the signboard of Bell Labs.This layoff has made many top scientists in the world unemployed.After several years of lingering, Lucent was finally acquired by Alcatel of France.The market value at the time of the merger was less than the level when it went public in 1996, only one-twentieth of its peak value.Today, the Bell Labs brand is still there, but the contact address has gone to France.
AT&T's landscape is slightly better than Lucent's.It has a relatively stable long-distance telephone income with high profits and a fast-growing mobile communication business, so it continued to support and expand its laboratory in the first few years of separation.Because it did not grab the Bell Labs brand, AT&T named its laboratory after Shannon, the inventor of information theory.At this time, the rise of the Internet and the popularity of wireless communications began to pose a threat to AT&T's core business.But AT&T is strong on both fronts, as well as its fast-growing broadband TV business.Originally, AT&T was best qualified to become the boss of these new fields, just as it successfully expanded from wired communication to microwave communication.But short-sightedness completely ruined it.
Around two thousand years ago, short-term investors discovered that the fastest way to make money was not to make a company successful, but to hype and package it for listing.Dismantling part of the company and selling it is undoubtedly the fastest way to make money.So AT&T decided to split it into four companies, dividing it into four companies: long-distance telephone, mobile phone, enterprise service and broadband.One of the biggest handwriting is the separate listing of the mobile sector.In May 1999, AT&T wireless went public with the help of Goldman Sachs, the best investment company on Wall Street, raising $10 billion in cash.This is by far the largest listing in human history.At that time, the directors and executives of AT&T gave some high-sounding reasons how the split would be beneficial to the development, but in fact, in the words of a director of AT&T Labs, the reason was only one word—greedy. When AT&T got a one-time windfall, it also lost its competitiveness in the telecommunications industry, because all it had left was a traditional long-distance phone business with declining revenue.Meanwhile, Shannon's lab has shrunk to the size it was founded in 1996. In the 9.11 terrorist attack in 2001, many of AT&T's equipment in New York were destroyed, and it could hardly afford to repair the equipment.Half a year later, AT&T's Shannon Labs was almost dissolved.Before AT&T Labs disbanded, its director, Dr. Larry Rabinar, had a premonition that something was going wrong, and he humanely arranged for his old subordinates to escape, and then retreated from Shannon himself. The position of the first in command of the laboratory.As an academician of the American Academy of Engineering, Rabina is second to none in the world in terms of academic level and management level, but he is simply unable to reverse the plight of AT&T Laboratories.This may be fate.
At this point, AT&T equipment manufacturing executives shortsightedly suggested a split.Their reason seems to be reasonable, because AT&T competes with two other long-distance telephone companies, MCI and Sprint, and the latter refuses to buy AT&T's telephone equipment.But this kind of one-time sales increase obviously means little to a company's long-term growth.Countless managers and employees at AT&T have seen this.I went through that AT&T split firsthand. In the summer of 1996, Bell Labs was divided into two. Everyone moved from the building in Murray Hill to the Frenham Industrial Park, and they talked about the separation of the family every day.Many felt that leaving AT&T, which had stable revenues and profits, might not be worth the cost of the device division for MCI and Sprint's markets.A few years later their prophecy came true.But at the time, even if AT&T executives were aware of it, they didn't have absolute control over the company. Several AT&T executives hold far less stock than Wall Street investment banks control.To put it bluntly, the CEOs of AT&T don't really own the company.There are many visionaries among them, but they can't influence the board of directors at all.What's more, the long-term interests of the company have little to do with them.If you can make a fortune during your tenure, why not do it?As investment firms on Wall Street, what they care about is when their stocks can double.1995 was an opportunity. The overall stock market was booming. At this time, if the equipment manufacturing sector and the telecommunications service sector were separated, the stock of the former would definitely soar.Wall Street sees it, the company's bosses know it, and the company's heavily owned employees know it.Everyone was sensible at first, but they were blinded by profit.A separation of chickens and eggs began.
AT&T will be divided into three parts, AT&T in the telecommunications business, Lucent in the equipment manufacturing business and NCR in the computer business. NCR is smaller, let's not mention it for now.The separation of Lucent from AT&T is definitely the first major event in the history of world telecommunications.In February 1996, Lucent was listed by Morgan Stanley, the most famous investment bank on Wall Street, raising three billion US dollars in cash, which became the largest listing in history at that time and the eleventh largest listing so far. Activity.When Lucent went public, its market capitalization reached 18 billion yuan.
As expected, MCI and Sprint came to buy Lucent's equipment.Lucent's sales are significantly higher than when it was part of AT&T.Soon, the stock price doubled and soared, while AT&T's stock was still slowly climbing at the original unpleasant speed during the same period, which was exactly what Wall Street and everyone expected.The National People's Congress on Wall Street made a lot of money, Lucent's senior officials made a big deal, and employees with equity shares made a small deal. In 1999, I met many Bell Labs scientists at a conference. When talking about stocks, they were all in high spirits and smiling.Before the stock market bubble burst in 2000, Lucent's stock had grown thirteen times in four years, with a market value of $244 billion.
However, these scientists also faintly feel some crisis.The original Bell Labs never worried about its own funds because of the big backer of AT&T.Now, Lucent's profits are not enough to feed a giant laboratory with 20,000 people, and it begins to ask the scientists and engineers there to develop research that can make money as soon as possible. (I will talk about the disadvantages of such a large laboratory as AT&T in the future) Bell Labs is no longer a research-based place in the past, and its innovative ability no longer exists. From 1995 to now, Bell Labs There is no more invention that caused a sensation in the world.Originally, AT&T's telecommunications services and equipment manufacturing complement each other and are a win-win combination.Separation is not good for the long-term development of both parties. The decline of AT&T and Lucent began at this time.
The sales boost from MCI and Sprint was almost a one-off.Wall Street has factored in that revenue when forecasting Lucent's earnings.For Lucent's stock to continue to grow, it must consistently beat Wall Street's expectations for sales and profits. (Note: Generally speaking, the current stock price of a company has already reflected the profitability of the current and a few years later. If you want the stock price to grow rapidly, the company's profit must be higher than everyone's expectations) In fact, Lucent can't do this at all. a little.In order to be able to support a high stock price, Lucent took a risky move that was later proved to be a failure.During the Internet bubble era, when countless small and medium-sized companies were rising and large companies were expanding, Lucent decided to "promote" its telecommunications equipment.The specific method is that Lucent lends money to various companies to buy Lucent equipment.As long as the equipment is shipped out of Lucent, it is included in the sales in the quarterly financial statements.If you read its financial report carefully, people can find that Lucent always has a large "account receivable", which has never actually entered Lucent.After the Internet bubble burst two thousand years ago, all companies that borrowed money to buy equipment went bankrupt, and Lucent's "accounts receivable" suddenly turned into a net loss. In 2001, Lucent had to close almost all of Bell Labs' research divisions.Only one or two laboratories were left symbolically to keep the signboard of Bell Labs.This layoff has made many top scientists in the world unemployed.After several years of lingering, Lucent was finally acquired by Alcatel of France.The market value at the time of the merger was less than the level when it went public in 1996, only one-twentieth of its peak value.Today, the Bell Labs brand is still there, but the contact address has gone to France.
AT&T's landscape is slightly better than Lucent's.It has a relatively stable long-distance telephone income with high profits and a fast-growing mobile communication business, so it continued to support and expand its laboratory in the first few years of separation.Because it did not grab the Bell Labs brand, AT&T named its laboratory after Shannon, the inventor of information theory.At this time, the rise of the Internet and the popularity of wireless communications began to pose a threat to AT&T's core business.But AT&T is strong on both fronts, as well as its fast-growing broadband TV business.Originally, AT&T was best qualified to become the boss of these new fields, just as it successfully expanded from wired communication to microwave communication.But short-sightedness completely ruined it.
Around two thousand years ago, short-term investors discovered that the fastest way to make money was not to make a company successful, but to hype and package it for listing.Dismantling part of the company and selling it is undoubtedly the fastest way to make money.So AT&T decided to split it into four companies, dividing it into four companies: long-distance telephone, mobile phone, enterprise service and broadband.One of the biggest handwriting is the separate listing of the mobile sector.In May 1999, AT&T wireless went public with the help of Goldman Sachs, the best investment company on Wall Street, raising $10 billion in cash.This is by far the largest listing in human history.At that time, the directors and executives of AT&T gave some high-sounding reasons how the split would be beneficial to the development, but in fact, in the words of a director of AT&T Labs, the reason was only one word—greedy. When AT&T got a one-time windfall, it also lost its competitiveness in the telecommunications industry, because all it had left was a traditional long-distance phone business with declining revenue.Meanwhile, Shannon's lab has shrunk to the size it was founded in 1996. In the 9.11 terrorist attack in 2001, many of AT&T's equipment in New York were destroyed, and it could hardly afford to repair the equipment.Half a year later, AT&T's Shannon Labs was almost dissolved.Before AT&T Labs disbanded, its director, Dr. Larry Rabinar, had a premonition that something was going wrong, and he humanely arranged for his old subordinates to escape, and then retreated from Shannon himself. The position of the first in command of the laboratory.As an academician of the American Academy of Engineering, Rabina is second to none in the world in terms of academic level and management level, but he is simply unable to reverse the plight of AT&T Laboratories.This may be fate.