The public is getting its first glimpses of the painful changes at the top of American Telephone & Telegraph Co.
The recent announcement of the departure of Archie J. McGill as president of the business equipment side of AT&T's touted new subsidiary, American Bell Inc., says a good deal about the problems facing the Bell System during its metamorphosis. So does the accompanying reorganization of American Bell's consumer products business.
Although AT&T officials, including McGill, tried hard this week to downplay the significance of the two events, there is no question that they demonstrate the management and marketplace chaos surrounding American Bell, the unregulated marketing subsidiary that was supposed to lead AT&T's thrust into telecommunications marketing.
The business equipment end is shaken by McGill's departure, and on the consumer products side, AT&T has decided to shift the responsibilities for telephones and new gadgets from American Bell directly to Western Electric, where the gear is built. American Bell thus retains only its product marketing function.
McGill was a rare commodity in AT&T management--an executive with a background beyond AT&T. He came from International Business Machines Corp. in 1973 with a mandate to move AT&T into the new competitive era of telecommunications.
Once thought by insiders to be destined for the top of the company, McGill is instead headed for a Wall Street investment firm, sources said.
A flamboyant, aggressive pitchman-planner, McGill was a visible figure within the Bell System, one who took every opportunity to sell his dissatisfaction with AT&T's monopoly past and his view of the company's new competitive posture. His challenge was to change a finely tuned corporate culture revolving around service to one driven by competition.
Asked last year whether strategy should come from AT&T's corporate management or from his group--the Advanced Information Systems division of American Bell--McGill left no doubt about his view. "Strategy has to emanate from the groups responsible for markets," he said. "If not, the strategy won't be followed."
Yet that notion, in part, is responsible for McGill's rather unceremonious departure, only five months after American Bell was set up. According to one insider, McGill's outspoken voice was no longer needed at a company faced with losing its regulated local monopoly revenues and whose leaders clearly have no choice but to respond to market needs.
McGill, who by one account frequently "screamed and cursed" at top Bell System executives, was never reticent.
There was a time when the staid Bell System may have needed "a change agent" like McGill, this source said. Today, however, American Bell needs skillful management and McGill, according to this official, "is not a good manager."
For the problem now in both the business equipment field that McGill once ran and in the consumer products business is to get the company's Western Electric manufacturing arm and its marketing arm--American Bell--to move in sync. In addition, American Bell faces within AT&T an increasingly difficult battle for corporate resources.
As of 1984, the new AT&T will contain Western Electric, Bell Labs, AT&T's network, or long distance operations, and American Bell, assuming the planned breakup of the company gets court approval. With the long distance business growing at 12 percent annually, and with AT&T saying it plans to lower long distance rates, substantial amounts of capital will be needed in that field to maintain and upgrade the long distance system.
"It's not that AT&T would not like to be neck and neck with IBM in the computer business, but the amount of resources AT&T can direct toward that kind of goal are limited," said one source close to McGill. "Were we going to bet on Archie McGill to create a neo-IBM?"
Furthermore, AT&T's problems in fields McGill oversaw are of enormous proportions, as a recent study indicates. In today's most significant and lucrative telecommunications equipment business, AT&T's market-share loss in PBXs, or computerized switchboards, is nothing short of "extraordinary," according to Steven G. Chrust, an analyst with Sanford C. Bernstein & Co. Inc., who has just published a major industry study.
AT&T's market share in the PBX and central office switching business will fall to 31 percent by the end of 1983, down from 55 percent as recently as 1980 and down from almost 75 percent a decade ago, Chrust estimated. That figure is likely to fall to 22 percent before reversing, according to Chrust.
Moreover, AT&T's most significant office systems product, called Dimension 85 and announced only five months ago, requires either "significant modification or a complete redesign" to compete with competitive products that offer more sophisticated data communications and voice services, Chrust wrote.
More competitive products and lower prices are likely with a year, Chrust believes, although he notes that the erosion of market share poses significant opportunity for AT&T competitors.
Echoing the thoughts of the Bell System insider, Chrust thinks McGill's departure is well timed. "What he did was infuse somewhat of a more competitive mentality into AT&T which was sorely needed," Chrust said yesterday. "But in that there was much conflict within the organization, his leaving will cause things to settle down and that will be good. I'm not sure McGill was able to bring the kind of organizational leadership that this monumental task required."
McGill, 52, says he has accomplished what he set out to do and says he's leaving because its "time for me to do something else." He never intended to make a career of AT&T, he said this week.
Asked if American Bell's sales have met expectations, McGill is predictably blunt. "On balance, we've done about what we expected to do," he said. "Anything anybody else says is baloney."
Despite the eroding market share, American Bell, according to McGill and Charles Marshall, American Bell's chairman, has done well with top-of-the-line equipment and poorly at marketing and selling less costly products, particularly those for small businesses.
McGill says the company is testing "a whole new product line for the low end" and its success could help there. "The real need here is for the integration of all the functions," McGill said. And Marshall maintains that American Bell, which will not release sales data, will achieve its 1983 sales targets. If it does, it will be without Baby Bell's adopted father.