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. Last Updated: 07/27/2016

Hughes Electronics Boss To Take Helm at AT&T

WASHINGTON -- AT&T Corp. on Monday sought to regain its luster as the world's leading telecommunications company by reaching outside its ranks and naming a veteran high-tech manager as its new chairman and chief executive.


The appointment of C. Michael Armstrong, 59, chairman of Hughes Electronics Corp., ends a years-long search for a successor to Robert E. Allen, the 40-year company man whose chairmanship was marked by headline-making layoffs, a disastrous foray into computers and the erosion of the company's profitable long-distance franchise.


An earlier candidate, publishing executive John Walter, resigned in July after nine months of butting heads with Allen and his loyalists at AT&T's headquarters in Basking Ridge, New Jersey.


But this time, AT&T's normally docile board of directors grabbed control of the succession planning and insisted that Allen step aside within 10 days to give Armstrong free reign to set AT&T on a fresh course and shake up a corporate culture that still shows vestiges of half a century of monopoly.


"We have found a leader with exceptional technological vision, a good understanding of the forces transforming the communications service industry and a strong record of accomplishment," said Walter Elisha, chairman of Spring Industries, an AT&T director, in announcing the widely expected appointment in New York.


In a nod to continuity, the board also named John D. Zeglis, 50, the company's general counsel and an Allen protege, to the No. 2 post as company president.


Wall Street was clearly pleased by the board's handiwork. AT&T shares closed out the day up $2 5/16 at $47.50.


Although AT&T continues to be the most widely held stock among American investors, over the past five years, it has provided an average annual return of only 11 percent compared to 21 percent for the broader stock market. Even with Monday's gain, AT&T stock has only recovered the ground that it has lost in the past two years.


Part of the problem has been financial: more than $10 billion in losses on its computer business at a time when price wars have cut deeply into its profitable long distance business. Just last quarter, for example, AT&T reported that while calling volumes had increased 10 percent, its revenues were down 1 percent.


But the larger problem for AT&T has been to come up with a plan to operate in a world where the distinctions between local, long distance wireless and Internet service are quickly disappearing. The company been sidelined as telecommunications companies joined forces to create vast global networks.


Monday, however, Armstrong made clear he intends to move quickly to join the fray by making huge investments in new wireless and Internet capacity, forging alliances with foreign and local phone companies and even making a few acquisitions of his own.


As part of its new focus on telecommunications, AT&T announced Monday that it would sell off its telemarketing arm and its highly profitable credit card operation, now with 18 million Visa and MasterCard holders nationwide. The two divisions are expected to fetch more than $1 billion.