AT&T 's Armstrong Era Ending

David Dorman will become the company CEO, probably by the end of the year: Sign o'the times?

July 18, 2002

4 Min Read
AT&T 's Armstrong Era Ending

Indicative of the new, conservative, crisis-era mentality in the telecom industry, AT&T is set to move beyond the experimental Michael Armstrong era.

President of AT&T Corp. (NYSE: T), David W. Dorman, will soon become chairman and CEO of the company (see Unknown Document 582162). He will be replacing Michael Armstrong, who has held those positions since 1997, the company announced yesterday.

The change will end an era of financial deck-shuffling in which Armstrong plowed heavily into cable properties and high-speed Internet access, only to switch direction and end up divesting many of those businesses, particularly the cable properties. Dorman, considered more of a stable, old-school telecom figure, will take over once AT&T spins off AT&T Broadband. The unit will be merged with Comcast Corp. (Nasdaq: CMCSA, CMCSK) to form a new company, AT&T Comcast. The deal, which was approved by shareholders of both companies on July 10, is expected to be completed by the end of the year (see Shareholders OK AT&T/Comcast Merger).

"He’s the right person for the right time,” says Frank Dzubeck, president of Communications Network Architects Inc. “While Armstrong was the right person for the right time before. They had to bring in somebody that exudes the trust… It’s better to take the conservative route right now… These days, no one wants people to be 'go-go.' ”

Armstrong, 64, who was scheduled to retire from AT&T in 2003, is set to become the new chairman of AT&T Comcast.

Dorman, 48, who has been president of AT&T for about a year and a half, has long been expected to succeed Armstrong when he leaves. This became especially apparent after the company’s CFO Charles H. Noski’s announcement in May that he would leave the company after it completed the spinoff and merger of the cable unit (see AT&T Names CFO). A spokesperson for AT&T said yesterday that the company had not yet decided who would replace Dorman as president once he takes over as chairman and CEO.

Observers say that Dorman, who as president has been responsible for the operations of the company’s $40 billion core business and consumer service unit was the natural choice for the job.

"He’s been in an operational role for quite some time,” says F. Drake Johnstone, an analyst with Davenport & Co. LLC. “He’s internal. He knows the business.”

The change of leadership represents more than just a changing of the guard, however. It marks a distinct shift in approach and attitude -- a shift that, following the debacles at companies like WorldCom Inc. (Nasdaq: WCOME) and Global Crossing Holdings Ltd., has become endemic throughout the industry.

The hard-charging salesman Armstrong was brought in to lead AT&T through the boom years in the telecom industry, and to reshape the company through growth in areas such as broadband access. Through investments of as much as $100 billion to buy cable TV networks, and with dreams of making the company the most powerful provider of all communications services, he aggressively set about changing the company’s image.

Now that the bubble has burst, AT&T's stock price has been cut in half over the past year, and it, like most companies in the industry, is working hard to reveal its steady, reliable side. Dorman, most observers agree, is the best man for the job. Instead of focusing on sales and making the company grow as quickly as possible, Dorman is expected to focus most on the business itself.

The fact that Dorman seems to have a level head on his shoulders doesn’t, however, mean that he won’t be aggressive, observers say. If scandal-ridden WorldCom does fall into bankruptcy, something that appears both probable and imminent, AT&T could still find itself in a position to purchase some of the assets.

Dorman's experience in the industry, which started back in 1981, stretches across local, long distance, and international services. When he became CEO of Pacific Bell in 1994, after a long career at Sprint Corp. (NYSE: FON), he was the youngest CEO ever at an RBOC. After SBC Communications Inc.acquired Pacific Bell, Dormer became the executive vice president of that company.

He left SBC to become chairman, president, and CEO of the Internet-based news and information service PointCast, thus participating in one of the very early experiences in Internet media technology. He was also CEO of an AT&T-British Telecom (BT) (NYSE: BTY) joint venture called Concert, before coming onboard as president of AT&T in December 2000.

— Eugénie Larson, Reporter, Light Reading

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