Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, September 21, 1995                   TAG: 9509210082
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: METRO 
SOURCE: Associated Press
DATELINE: NEW YORK                                LENGTH: Medium

AT&T SPLITS UP FOR LOCAL CALLS

The telecommunications giant is also junking its personal-computer manufacturing business, acknowledging that its 1991 merger with NCR Corp. was a disaster.

``AT&T is reinventing itself once again,'' chairman Robert Allen said Wednesday.

AT&T will break into companies that will focus on communication services, communication equipment manufacturing, and manufacturing of large computers. Shareholders will get a stake in each new company.

The move - which by some measures is even bigger than the 1984 breakup of AT&T - stunned Wall Street, which has seen one colossal merger after another in the telecommunication and entertainment industries.

Founded as Bell Telephone in 1877 by Alexander Graham Bell, AT&T has built itself into a giant whose stock is the most widely owned in the nation and is said to be a part of every widow's portfolio.

In 1984, facing a government antitrust suit, AT&T agreed to split into seven regional Baby Bell phone companies in a settlement that spawned the era of global telephone competition.

Under the settlement, AT&T is barred from buying a Baby Bell because that would reconstitute AT&T's monopoly over local and long-distance service.

However, once AT&T sets up a separate telephone equipment manufacturing company, the communication services company is more likely to pursue a partnership with a Baby Bell.

Such partnerships weren't realistic for AT&T after the 1984 breakup because local phone companies are the biggest customers of AT&T's equipment business.

Legislation now in Congress would make it even more attractive for AT&T and other companies to enter the local phone business.

``This restructuring of AT&T is the next logical turn in our journey since divestiture,'' Allen said. ``In recent months, it's become clear to me that for AT&T's businesses to take advantage of the incredible growth opportunities in every part of the information industry, it has to separate into smaller and more-focused businesses.''

The communication services business, which includes long distance, cellular service and credit-card calling, will retain the AT&T name. Names for the others have not been selected.

AT&T's computer operation will eliminate 8,500 of 43,000 jobs this fall in a move expected to cost $1 billion. The company will quit making personal computers - an area where competitors operate more profitably - but continue producing larger computer systems.When it acquired NCR, AT&T had hoped to combine communications expertise with computer manufacturing.

But the NCR unit - later renamed AT&T Global Information Systems - has been hit hard by the shift in demand from mainframe computers to networks of smaller machines. It lost $332 million in the first two quarters of this year.

AT&T did not indicate any other cuts in its work force of 303,000.

The breakup comes at a time when many other big telecommunication and media industry companies have been coming together in the belief that being big will mean more growth.

``In a time when scale is all the rage, to see AT&T walk in the other direction is a major wake-up call,'' said Mark Plakias, analyst at Strategic Telemedia in New York.