AILING AT&T HIRES A PRINTER

By Daniel Kadlec

"John who?" They aren't asking that question at AT&T's main office in Basking Ridge, N.J., anymore, but they are just about everywhere else. In a shocker, AT&T, the nation's 10th largest company, with estimated 1996 revenues of $51 billion to $52 billion, dialed long distance--to a Midwest commercial printer, of all places--to find John Walter, its new president and heir apparent to CEO Robert Allen, who will retire in 1998, two years early. "When one of the world's largest companies loses its president and can't find anyone inside, what's going on?" asks Sprint CEO William Esrey.

Wall Street wonders too. AT&T stock, already in the dumper, fell 9% in the two days after Walter was named, clipping $5.7 billion off the embattled giant's market value. Ouch. Once so safe it was considered perfect for widows and orphans, AT&T remains the nation's most widely held stock, with 3.2 million shareholders.

Walter, 49, the former chairman and ceo of R.R. Donnelley & Sons in Chicago, joins AT&T this week. Relatively unknown, he has been thrust into the spotlight and asked to supercharge a company at the opposite end of the communications spectrum. Walter is experienced at the art of change management, though, having put R.R. Donnelley through a complete restructuring as it coped with technological shifts in its industry.

AT&T needs the same, and then some. "AT&T needs someone who can rally the troops beyond their distractions," says Jeffrey Kagan, president of Atlanta consultants Kagan Telecom. Distractions? Long-distance market share is falling, profits are sagging at its credit-card business, and head count is being slashed as the company splits itself into three pieces. For Walter and AT&T, it's remake-it-or-break-it time.

--By Daniel Kadlec. Reported by William A. McWhirter/Detroit and Jane Van Tassel/New York

With reporting by WILLIAM A. MCWHIRTER/DETROIT AND JANE VAN TASSEL/NEW YORK