Malone Has More AT & T Advice

Liberty Media Group chairman John Malone has more advice for AT & T Corp. and its sagging stock.

AT & T's largest individual shareholder mapped out a three-point plan to cure AT & T's woes: combine consumer long-distance and networking operations into a separate tracking stock; capitalize on newfound status as the largest cable operator in the country by increasing focus on content; and pay managers more in order to stem a talent exodus.

In a July 11 interview in The Wall Street Journal, Malone said he favored AT & T's divesting its stake in Time Warner Entertainment, rather than Liberty. As part of the Federal Communications Commission's approval of AT & T's $44 billion acquisition of MediaOne Group Inc. in June, AT & T has to divest Liberty or TWE, or shave away 9.7 million cable subscribers.

Malone raised some eyebrows by contending that AT & T should load up on content. The FCC has been trying to separate mega-operator AT & T's delivery business from programming.

The Yankee Group analyst Brian Adamik said last week that making a bigger push into content could have its benefits, though, even if it meant selling off some cable systems.

"I think what Malone is trying to say is that there are tremendous synergies between content and the broadband pipe," Adamik added.

AT & T's stock has been languishing for months, dropping about 40 percent since March and hitting its 52-week low of $31.63 per share June 30. After Malone's comments in the Journal July 11, AT & T stock fell 13 cents to $31.87. The stock climbed $1.81 per share the next day, closing at $33.69.

Bear Stearns & Co. analyst William Deatherage said that while Malone's comments were not surprising, tracking stocks alone will not solve AT & T's problems.

"The issue with the stock price is execution," Deatherage said. "Investors will closely monitor performance. If the company meets or beats expectations, the stock will recover. Financial engineering alone isn't the solution."

Malone's comments were not that much different from ones he made in October in Forbes. Back then, when AT & T's stock was at $43, Malone also called for more tracking stocks to help boost AT & T's sagging shares.

AT & T's board is considering taking the advice to issue tracking stocks, along with several other remedies to boost its sagging stock price, including selling off assets. "These are live issues currently under consideration," said one AT & T insider who asked not to be named.