AT&T Corp leaped in to trump all the other major deals in the technology sector yesterday by announcing that it planned to split into three companies, spinning the computer business and the communications equipment business off to shareholders, effectively recreating two of its acquisitions – a rather smaller NCR Corp and a very much enlarged Paradyne Corp, and retreating to become a global telecommunications services giant. The fact that it is cutting NCR loose suggests that it has been unable to find a buyer for it, although if the market puts a low enough valuation on it, a buyer may well appear. Even the leasing company, AT&T Capital Corp, is going, but that will be sold outright. In preparation for the spin-off, AT&T is pulling NCR out of the personal computer business although it will take a third party line OEM for the benefit of its customers, and it expects to fire 8,500 of the 43,000 employees, taking a $1,500m hit to cover the cost. It will cease personal computer manufacture and distribution through value-added resellers. The split into three separate companies is expected to be completed by the end of 1996. Following the announcement, AT&T shares leaped $4.875 to $62.50. The services company, operating under the AT&T name, will embrace long-distance telephone, AT&T Card Services, AT&T Wireless Services and part of Bell Laboratories. It’s 1994 pro-forma turnover was $49,000m in 1994. The equipment business, with pro-forma 1994 turnover of $20,000m will include network systems, global business communications systems, consumer products, AT&T Paradyne, most of the activities of Bell Laboratories, and AT&T’s microelectronics units. It has not yet been named, but AT&T is considering a public offering of 15% of the equipment business in the first half of 1996 ahead of the spin-off. The 80% of AT&T Capital Corp owned by AT&T will either be sold to another company or sold via a public offering, and AT&T will use the proceeds from the sale of AT&T Capital and the 15% of the equipment company to reduce current debt, giving each of the three new firms a balance sheet appropriate to its industry.
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