The fall of the mighty
There's an interesting analysis of the final demise of AT&T in an Economist article entitled "The fall of a corporate queen" (2/3/2005). The article traces the 128-year history of the company from being "a brash start-up that won over 600 patent lawsuits in its first 18 years, then as a cut-throat competitor that pushed the limits of lawfulness to consolidate America's telecoms market and finally, until 1984, as a government-sanctioned monopoly."
The article tells how, for much of the 20th century, AT&T was the world's largest firm, in terms of both revenue and market capitalization. It was the preferred safe "widows and orphans" stock. It was the home of Bell Labs, a spectacular source of innovation produced the transistor, the laser, and a number of Nobel Prize winners. It had amazing cash flow.
The article quotes, Clayton Christensen of Harvard Business School, author of the excellent book The Innovator's Dilemma as noting "The world is filled with companies that are marvelously innovative from a technical point of view, but completely unable to innovate on a business model." AT&T simply wasn't ready to compete after the 1984 breakup of its monopoly. It missed out on the rise of computers, on wireless technology, and on the Internet, even though it had years to adapt to those changes after the breakup. By the time AT&T started to adapt to what was changing, it was too late.
The company used its huge cash supply to acquire computer maker NCR, cable TV operators TCI and MediaOne, and wireless provider McCaw Cellullar, but it didn't know what to do with those assets. In time, it sold them off just to keep alive. Even worse, it spun off the remainder of Bell Labs as Lucent Technologies in 1995, just when it needed more technological edge, not less.
For the lesson, the article quotes Paul Starr, a communications historian at Princeton University "It ought to be humbling to any empire-builder to see what was once the greatest corporation in America be acquired by one of its offspring…But it's not necessarily a bad thing when the mighty lose sleep at night."
5:24:29 PM 
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