A T& T’s new computer
When it was broken up in January, American Telephone & Telegraph lost all its local phone companies but gained the right to invade the computer market. Last week the still giant firm (assets: $34 billion) launched its first major attack. AT&T rolled out six machines ranging from a $9,950 desktop model to a high-powered $340,000 one. Said Stephen McClellan, a data-processing industry analyst for Salomon Bros.: “A T & T’s entry into computers is probably the most significant event in the industry since IBM launched its Personal Computer in 1981.”
The new machines, intended for banks, airlines and other big customers, are the start of what promises to be an extended family of data processors. AT&T is expected to unveil a personal computer later this year and to expand gradually into large mainframe machines. Says James Anderson, vice president for research of Advest, Inc., a Connecticut-based securities firm: “AT&T is too big to be a niche player. It’s obvious that they are after the whole market.”
The company hopes that its move into computers will help smooth what has been a shaky start after its breakup. Faced with rising costs resulting from regulatory decisions, Chairman Charles Brown said two weeks ago that AT&T profits in the first quarter would be lower than expected. He indicated that the firm might have to slash its dividends after the first quarter unless the Federal Communications Commission reverses rulings that require A T & T to pay substantially more than rival long-distance firms for access to local telephone networks. The agency agreed last week to re-examine the matter.
Although barred from selling computers before the breakup, the company for more than 30 years has been developing and building them for telephone-call switching, billing and other internal needs. In 1947 scientists at A T& T’s Bell Laboratories invented the transistor, which laid the foundation for microchips. The company also created the UNIX computer operating system, which has been licensed to more than 2,200 businesses, universities and government agencies in the U.S. and ten other countries since the early ’70s.
AT&T seeks to cash in on its communications experience with its first line of commercial computers. The new machines can be tied together so that they can swap information easily. Included in ast week’s introduction, moreover, was a system that allows the A T & T products o link up in networks with IBM personal computers and compatible machines. ‘AT&T has more networking experience than anybody else on earth,” says Advest’s Anderson.
The company’s marketing strategy is to stress the reliability of its computers. Says Vice Chairman James Olson: “They are ideal for those applications where a few hours of down time can be catastrophic.” Such uses could include airline-reservations systems and military operations. The largest of the six AT&T machines can continue running even while being repaired or tested.
Not everyone, though, reacted favorably to the AT&T computers. Critics complained that they lacked sufficient software and cost just as much as comparably equipped products from other firms. Others questioned whether the company, which is training 6,000 computer salespeople and 2,000 service technicians, has the ability to sell data processors effectively. “No one knows how long it’s going to take for those people to become an effective sales organization in a competitive market,” says McClellan of Salomon Bros. “AT&T has never had to do that before.”
On Wall Street, AT&T stock fell 12.5¢ a share, to $15.75, the day the machines were announced. Shares of IBM limbed $1.63 to $113.88, while those of Digital Equipment, the second largest computer maker, rose $3.75, to $91.25. Said a Digital spokesman of the challenge posed by the new AT&T products: “We are vigilant but not scared.”
The phone company, meanwhile, clearly is in the computer market to stay. At a time when its traditional long-distance business is under attack from increasingly aggressive rivals like MCI Communications, A T & T is out to wove that it can play in the other guy’s Ballpark.
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