Malone Machinations Stir Stock
By MIKE FARRELL -- Multichannel News, 9/18/2000
Rumors of what Liberty Media Group chairman John Malone has planned for AT & T Corp.'s annual strategy meeting in New York this week gave a brief boost to AT & T's battered stock.
AT & T shares gained $1.50 each, or about 4 percent, in early trading last Wednesday on market rumors that Malone was orchestrating a coup to replace AT & T chairman C. Michael Armstrong.
But when Liberty denied the rumors and AT & T issued its standard "no comment," the stock retreated slightly, closing at $31.88, up just $1.32.
Last Thursday came a report in the Los Angeles Times that Malone was maneuvering to get AT & T to sell its wireless business and merge it with cellular-telephone pioneer Craig McCaw's Nextel Communications Inc. Nextel spokesman Ben Banta declined comment, citing company policy. AT & T's stock ticked down, closing at $31.75 Thursday.
Malone's agitation at AT & T started last October, when he told Forbes he favored more tracking stocks at AT & T.
In July, he told The Wall Street Journal his three-point recovery plan: Combine AT & T's consumer long-distance and networking operations into a tracking stock; get more involved in content; and increase managers' pay to stem the departure of talented executives.
Most observers don't seem to feel that Malone really wants to take the helm at AT & T. But some analysts believe he will make a splash at the AT & T strategy meeting.
"I think [Malone] will get more involved. His economic stake is too large not to," SG Cowen Securities Corp. cable analyst Gary Farber said. "His is not a stock position he can forget about and hope it gets better. Either he gets more involved or he gets somebody else [to replace Armstrong]."
Much of Malone's net worth is tied up in AT & T's sagging stock. He got about 33 million AT & T shares when the company bought Tele-Communications Inc. in March 1999, making him the largest individual shareholder. Since then, he has sold about 4.6 million shares for $250 million, slimming down to 28.4 million shares.
Malone may have hurt his chances of swaying AT & T's board with his very public statements. According to one AT & T insider, Malone's past comments have so angered some board members that "John couldn't get elected dogcatcher in that group. People are not about to turn the company over to John for direction. Anything he says at that meeting is going to be looked at with a jaundiced eye."
The source added that ousting Armstrong has little chance because the chairman has "100 percent support on the board," and given Malone's history as an operator, installing him as the new chairman of AT & T would be disastrous.
"No one has ever accused Malone of being a good operating executive," the source said. "John doesn't run companies."
Although it is expected that several different scenarios will be studied during the strategy meetings, the source said whatever is decided will not be implemented overnight.
