At&T; Performs $21 Billion Spinoff Lucent Creation Is Broadest Stock Distribution Ever

AT&T Corp., arming itself against competition in the telecommunications industry, on Monday completed the spinoff of its equipment division in the broadest stock distribution ever.

AT&T sent 525 million shares in Lucent Technologies, the newly spun-off company, to the 3.3 million people who own AT&T stock, the nation’s most widely held.

The massive breakup creates a $21.4 billion high-technology giant specializing in phone equipment and intensifies the race to exploit looming changes in federal telecommunications rules. Lucent, based in Murray Hill, N.J., starts out as the 35th largest U.S. company and includes Bell Labs, AT&T’s venerable research and development arm.

Like other long-distance companies, AT&T wants to expand into local phone services to take advantage of the Federal Telecommunications Act of 1996, which removes competitive barriers between telephone, cable and other communications companies.

The spinoff completes the first step in AT&T’s split into three separate companies, rivaling the breakup of Ma Bell in 1984, when it spun off the Baby Bells. AT&T is ejecting its computer manufacturing unit, NCR Corp., late this year, in the final stage of the new restructuring.

“It gets AT&T to concentrate on what they do best,” said Stephen Shook, a telecommunications at Interstate-Johnson Lane in Charlotte, N.C. “They will be more purely a telecommunications provider.”

AT&T’s telephone equipment arm was hurt by its association with AT&T when it tried to sell products to AT&T rivals. The spinoff will not only free Lucent to sell more products, it could also save AT&T money by freeing it to buy products, at possibly lower prices, from Lucent’s rivals.

“This is one of the fundamental rationales behind the whole spinoff - to eliminate the strategic conflict between phone companies and AT&T,” said Bill O’Shea, Lucent’s president of international regions.

Lucent hopes that a more aggressive product pitch will help it expand abroad, aiming to boost overseas revenue above the current 25 percent of total company revenue. Targeted markets include emerging economies such as Mexico, which have underdeveloped infrastructures in need of telephone switching systems, fiber, cable and other Lucent products.

At the same time, Lucent is sharply cutting costs over the next three years by between 4 and 8 percent, including trimming thousands of jobs from its worldwide staff, which now stands at 125,000.

To complete the spinoff, AT&T began distributing its remaining 82 percent interest in Lucent to its shareholders. Investors who bought AT&T stock by Sept. 17 will divide the Lucent shares, representing about 80 percent of Lucent’s overall value. The other 20 percent of Lucent was sold to the public in April.

Each AT&T shareholder receives about one Lucent share for every three AT&T shares.