WHY BREAK IT UP

STILL, ITS EASY TO UNDERSTAND WHY ARMSTRONG MIGHT GO ALONG WITH A PLAN TO BREAK UP THE COMPANY.

STRANGE AS IT SOUNDS,WALL STREET MAY CONCLUDE THAT THE PARTS OF AT&T ARE INDEED, WORTH MORE THAN THE WHOLE.

HERES THE LOGIC

AT&T HAD A MARKET VALUE OF ABOUT 101 BILLION, BASED ON ITS STOCK PRICE TUESDAY.

BUT, ABOUT 42% OF THE COMPANY'S VALUE COMES FROM THE 85% STAKE IT HAS IN AT&T WIRELESS, BASED ON THE TRACKING STOCK'S VALUE TUESDAY.

THAT MEANS INVESTORS CONSIDER ALL THE REST OF AT&T - BUSINESS SERVICES, CONSUMER SERVICES AND BROADBAND - TO BE WORTH JUST $59 BILLION.

BUT AT&T PAID MORE THAN $100 BILLION FOR TCI AND MEDIAONE, THE BASIS OF ITS BROADBAND BUSINESS.

THE UNIT SHOULD BE WORTH ABOUT $87.5 BILLION BASED ON CURRENT INDUSTRY VALUATIONS, SAYS PATRICK COMACK ANALYST FOR GUZMAN & CO.

SO JUST THE WIRELESS AND BROADBAND UNITS SHOULD TRADE FOR MORE THAN THE PRICE INVESTORS NOW PAY FOR ALL OF AT&T, WHICH ALSO INCLUDES BUSINESS AND CONSUMER SERVICES.

IF BROKEN INTO FOUR PARTS, COMACK SAYS, THE VALUE OF ALL THE STOCKS ADDED TOGETHER WOULD EQUAL $53 A SHARE, BASED ON AT&T'S CURRENT SHARES OUTSTANDING.

HE FIGURES THE BROADBAND BUSINESS IS WORTH $22 A SHARE; BUSINESS SERVICES, $15; CONSUMER SERVICES, $5; AND AT&T WIRELESS $11.

JOHNSTONE IS A TAD MORE CONSERVATIVE, ESTIMATING THE SUM OF THE STOCKS AT ABOUT $50 IN 12 TO 18 MONTHS, IF INVESTORS PAY UP TO $15 A SHARE FOR BUSINESS SERVICES AND $3 A SHARE FOR CONSUMER SERVICES.

COMACK SAYS A BREAKUP MAKES SENSE FOR INVESTORS BECAUSE THE BROADBAND AND WIRELESS UNITS WILL EARN THEIR FULL VALUE, AND BUSINESS AND CONSUMER SERVICES WILL EARN AT LEAST SOME VALUE.

"INVESTORS LABEL THIS STOCK AS LONG DISTANCE, AND NEAT ASSETS ARE HIDDEN AND DESTROYED BY INVESTORS PERCEPTIONS," COMACK SAYS.

"THIS IS A WAY TO CARVE OUT THE PIECE THAT IS SICK AND DYING, AND THE REST CAN GO ON."

YET OTHERS SAY IT COULD BOOST AT&T STOCK SHORT TERM BY FULLY REALIZING THE VALUE OF SUCH FAST-GROWING UNITS AS WIRELESS.

WHILE 15% OF THE WIRELESS FIRM IS OWNED BY SHAREHOLDERS THROUGH A TRACKING STOCK, THE 85% STILL OWNED BY AT&T CRIMPS THE STOCK'S PERFORMANCE BECAUSE ITS FORTUNES ARE TIED TO THE REST OF THE BEHEMOTH.

"THE CONSUMER BUSINESS IS DRAGGING IT DOWN," ANALYST ADAMIK SAYS.

"THE MARKET DOESN'T KNOW HOW TO APPROPRIATELY VALUE IT."

"THEY HAVE A LOT OF INTERESTING SUCCESS STORIES THAT GET BURIED."

BUT NO MATTER HOW AT&T DIVIDES ITS BUSINESSES, IT CAN'T AFFORD TO DISAPPOINT INVESTORS OR CONSUMERS ANYMORE.

"THEY CAN SPLIT THEM UP AS MUCH AS THEY WANT," SAYS PHILIP WOHL OF S&P EQUITY GROUP.

"THE BOTTOM LINE IS THEY HAVE TO PRODUCE."

END