This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.nytimes.com/2019/10/28/business/dealbook/att-earnings-elliott-management.html

The article has changed 8 times. There is an RSS feed of changes available.

Version 0 Version 1
AT&T’s C.E.O. to Stay On Another Year After Challenge From Activist Fund AT&T C.E.O. to Stay On for Another Year After Challenge From Activist Fund
(about 1 hour later)
AT&T, the embattled telecom giant that has turned into a major Hollywood player, announced a set of changes to its corporate governance Monday that will keep its chief executive in place for at least another year, as well as a stepped up business strategy meant to address a challenge from an activist hedge fund. AT&T, the embattled telecom giant that has turned into a major Hollywood player, announced a set of changes to its corporate governance Monday that will keep its chief executive in place for at least another year, as well as a stepped-up business strategy meant to address a challenge from an activist hedge fund.
The company, based in Dallas, said Randall L. Stephenson, the chief executive and chairman of the board, would remain in charge at least through 2020. Once he retires, the roles of chairman and chief executive will be split. In addition, two directors will depart after 18 months, making way for new blood.The company, based in Dallas, said Randall L. Stephenson, the chief executive and chairman of the board, would remain in charge at least through 2020. Once he retires, the roles of chairman and chief executive will be split. In addition, two directors will depart after 18 months, making way for new blood.
AT&T also announced a set of financial targets aiming to lift revenue and profit each year for the next three years, and the company said it expected to fully pay off the debt associated with last year’s $80 billion purchase of Time Warner. AT&T will further review its sprawling set of businesses to see what could be sold or split off into a partnership with other companies.AT&T also announced a set of financial targets aiming to lift revenue and profit each year for the next three years, and the company said it expected to fully pay off the debt associated with last year’s $80 billion purchase of Time Warner. AT&T will further review its sprawling set of businesses to see what could be sold or split off into a partnership with other companies.
The moves are a response to Elliott Management, one of Wall Street’s biggest and most aggressive hedge funds. Last month, the firm sharply criticized AT&T for what it called a lack of leadership, a bloated operating structure and several mistimed deals, including its 2015 acquisition of the satellite operator DirecTV. The moves are a response to Elliott Management, one of Wall Street’s biggest and most aggressive hedge funds that has invested in AT&T. Last month, the firm sharply criticized AT&T for what it called a lack of leadership, a bloated operating structure and several mistimed deals, including its 2015 acquisition of the satellite operator DirecTV.
In recent years, AT&T has transformed itself from a wireless phone operator into a major media player, selling satellite TV service to millions of consumers and now owning a large chunk of Hollywood with plans for a forthcoming streaming service. In recent years, AT&T has transformed itself from a wireless phone operator into a major media player, selling satellite TV service to millions of people and now owning a large chunk of Hollywood with plans for a forthcoming streaming service.
But analysts and investors have questioned the company’s latest foray into entertainment, and its shares have declined over the last few years.But analysts and investors have questioned the company’s latest foray into entertainment, and its shares have declined over the last few years.
AT&T made its announcement as part of its third-quarter earnings report. The company earned $3.7 billion on $44.6 billion in revenue for the July-September period. Wall Street had expected about $6.8 billion in profit and $45 billion in sales. In a statement that came across as a peace offering to the activist hedge fund, Mr. Stephenson said the “objectives we have outlined today have been central to our plans for many months,” but added that the company’s “thinking has also benefited from our engagement with our owners, including Elliott Management.”
In a statement, Elliott Management welcomed AT&T’s new plan, saying, “We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies.“ The two sides have been in talks over the last few weeks to broker an agreement. AT&T made its announcement as part of its third-quarter earnings report. The company saw a steep drop at its DirecTV business, losing more than 1.1 million customers. That cut into profits. AT&T earned $3.7 billion on $44.6 billion in revenue for the July-September period. (Wall Street had expected about $6.8 billion in profit and $45 billion in sales.) The company added 255,000 wireless customers and now has more than 79 million total phone customers.
Elliott Management welcomed AT&T’s new plan, saying in a statement, “We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies.” The two sides have been in talks over the last few weeks to broker an agreement.
In September, Elliott Management asked the company to stop striking new acquisitions, to increase dividends and share buybacks and to improve its efficiency by cutting workers and selling off underperforming divisions like DirecTV. The fund also said it was seeking seats on AT&T’s board.In September, Elliott Management asked the company to stop striking new acquisitions, to increase dividends and share buybacks and to improve its efficiency by cutting workers and selling off underperforming divisions like DirecTV. The fund also said it was seeking seats on AT&T’s board.
Elliott Management had further questioned AT&T’s ability to handle its newest property, WarnerMedia, the company behind CNN, the Warner Bros. movie studio and HBO. AT&T acquired the media giant last year (then called Time Warner) in a bid to find new growth and to distinguish itself from its chief rival, Verizon.Elliott Management had further questioned AT&T’s ability to handle its newest property, WarnerMedia, the company behind CNN, the Warner Bros. movie studio and HBO. AT&T acquired the media giant last year (then called Time Warner) in a bid to find new growth and to distinguish itself from its chief rival, Verizon.
Elliott Management, a hedge fund with $38 billion under management, last month took a $3.2 billion stake in AT&T, or about 1 percent of outstanding shares. The telecom behemoth is most likely the largest company the fund has taken on and its limited stake meant it had less negotiating leverage than it had in previous campaigns.Elliott Management, a hedge fund with $38 billion under management, last month took a $3.2 billion stake in AT&T, or about 1 percent of outstanding shares. The telecom behemoth is most likely the largest company the fund has taken on and its limited stake meant it had less negotiating leverage than it had in previous campaigns.
Still, activist groups like Elliott Management take positions in businesses with the idea of rallying other investors to their way of thinking. In a 24-page letter sent to the board last month, the firm questioned whether AT&T had strayed from its mission when it acquired Time Warner, and suggested a change to its management team.Still, activist groups like Elliott Management take positions in businesses with the idea of rallying other investors to their way of thinking. In a 24-page letter sent to the board last month, the firm questioned whether AT&T had strayed from its mission when it acquired Time Warner, and suggested a change to its management team.
AT&T had “transformed itself into a sprawling collection of businesses battling well-funded competitors,” the activist fund said.AT&T had “transformed itself into a sprawling collection of businesses battling well-funded competitors,” the activist fund said.
The investment group had also taken aim at John Stankey, the head of WarnerMedia whose elevation to chief operating officer of AT&T this month put him in line to succeed Mr. Stephenson. Citing the promotion, Elliott Management noted with disapproval that he “would now also be responsible for an additional $145 billion of revenue as the president and C.O.O. of the entire company.” The moves by AT&T address some of Elliott Management’s concerns, but the company managed to fend off immediate challenges to its executive ranks.
. The investment group had taken aim at John Stankey, the head of WarnerMedia whose elevation to chief operating officer of AT&T this month put him in line to succeed Mr. Stephenson. Citing the promotion, Elliott Management noted with disapproval that he “would now also be responsible for an additional $145 billion of revenue as the president and C.O.O. of the entire company.”
Mr. Stephenson’s commitment to stay on through 2020 is a shift from a previous plan. He had considered stepping down some time next year, but his willingness to remain longer would delay any potential elevation for Mr. Stankey. The soonest he could succeed Mr. Stephenson would be 2021.
AT&T said it would evaluate its myriad divisions to see what no longer fits within its main business. The company this year already sold off several smaller divisions and some real estate that altogether generated $6 billion in capital. AT&T said it now aims to sell off more assets that could generate between $5 billion and $10 billion.
For the moment that may not include one of its largest divisions, DirecTV, the ailing satellite service. Mr. Stankey has said the service remains vital to its current strategy, which includes targeted advertising and streaming services.
AT&T has suffered from customer losses at DirecTV and a price war at its wireless business as rivals like Verizon and T-Mobile lure customers away with cheaper rates. To keep them from defecting, AT&T started to bundle in other services, like DirecTV.AT&T has suffered from customer losses at DirecTV and a price war at its wireless business as rivals like Verizon and T-Mobile lure customers away with cheaper rates. To keep them from defecting, AT&T started to bundle in other services, like DirecTV.
The purchase of Time Warner was another way to offer products not found elsewhere, and AT&T has spent considerable time and money to create a new streaming service, called HBO Max, to compete with Netflix and others. Details of the new product will be revealed at an investor presentation Tuesday afternoon on the Warner Bros. lot in Burbank, Calif.The purchase of Time Warner was another way to offer products not found elsewhere, and AT&T has spent considerable time and money to create a new streaming service, called HBO Max, to compete with Netflix and others. Details of the new product will be revealed at an investor presentation Tuesday afternoon on the Warner Bros. lot in Burbank, Calif.
Mr. Stankey, who took over the newly acquired media business last year, clashed with some of the top executives. Richard Plepler, the longtime HBO chief executive who is often credited for helping to define HBO’s signature aesthetic, stepped down. People familiar with Mr. Plepler’s thinking said at the time that he found that he had less autonomy as an AT&T employee. The company also lost David Levy, who resigned as president of Turner Broadcasting, the division that includes TBS and TNT, and Kevin Tsujihara, who ran the Warner Bros. studio group before stepping down in March after accusations that he tried to get television and film roles for a woman with whom he had a sexual relationship. When the allegations first came to light, a lawyer for Mr. Tsujihara said his client “did not have a direct role in the actress being cast in any movie.”
In September, Elliott Management said it wasn’t pleased with the loss of Mr. Plepler and the recent promotion of Mr. Stankey, citing “alarming executive turnover” at WarnerMedia in its Monday letter.
The investment firm, however, was pleased with AT&T’s new plan and thanked Mr. Stephenson and “the rest of the team for their constructive collaboration and leadership.”