In Business This Week: HEADLINER
MICHAEL ARMSTRONG: AT&T'S CUP OF TEA?
Expectations were high for Michael Armstrong's first presentation to analysts as CEO of AT&T. In fact, the meeting was so eagerly anticipated that Armstrong opened by warning: "For those of you expecting Moses and the Ten Commandments, you might be a little disappointed."
Still, Armstrong handed down an ambitious plan. As part of an effort to reduce overhead to 22% of sales from 29% in two years, AT&T will cut 15,000 to 18,000 of 128,000 jobs. Some 10,000 to 11,000 managers should take early-retirement offers. An additional 5,000 to 7,000 nonmanagement positions will be cut through attrition and layoffs.
Armstrong also outlined expansion plans. AT&T will make $8 billion in capital investments in 1998, much of it to modernize its network so it can carry data as easily as voice traffic. Some $1 billion will be invested to capture some of the $20 billion local business market. Armstrong also wants to expand AT&T's international, wireless, and Internet businesses. No, it's not the Ten Commandments. Only the rules for AT&T's hoped-for rebound.EDITED BY KELLEY HOLLAND By Peter ElstromReturn to top
A NEW BLACK MARK FOR GREEN TREE
THE NEWS HAS GONE FROM bad to worse at Green Tree Financial. Last November, overly optimistic accounting forced the consumer-finance company to take a $150 million charge to fourth-quarter earnings. Now, it appears the accounting department has goofed again. It overlooked partial prepayments on mortgage loans in 1996 and now must restate that year's earnings by $200 million. "It's embarrassing for a company this size," says Oppenheimer analyst Steven Eisman. Considering the shareholder lawsuits raining down on Green Tree, the error may cost the company and its auditor more than embarrassment. Green Tree CEO Lawrence Coss will also have to pay, since his $102 million in compensation for 1996 was based on a percentage of pretax income.EDITED BY KELLEY HOLLANDReturn to top
PINCHING PENNIES AT PENNEY
IT'S CLEARANCE TIME AT J.C. Penney. Facing weak sales and profits and high costs, the retailer on Jan. 27 unveiled a plan that includes closing 75 stores and slashing 4,900 jobs. The moves will result in a fourth-quarter pretax charge of $225 million, including $35 million related to integration of the Eckerd drugstore business, acquired in 1997. "We need to challenge the processes and identify unproductive assets in order to remain competitive," says Penney CEO James Oesterreicher. He estimates the changes will save about $50 million this year and $105 million in fiscal 1999.EDITED BY KELLEY HOLLANDReturn to top
LONG DISTANCE CATCHES A BREAK
LONG-DISTANCE CARRIERS GOT a break in their losing streak in the courts. On Jan. 26, the Supreme Court agreed to hear an appeal of a 1997 Eighth Circuit decision that gave the Baby Bells the first of a string of court victories. The lower court had invalidated Federal Communications Commission rules that made it easier for long-distance companies to compete with the Bells in the local-calling market. The Court will likely hear the case this fall.EDITED BY KELLEY HOLLANDReturn to top