Dave Dorman is a hoot to talk with. Who else would call his competitors a “leper colony”?
This interview is in this month’s Business 2.0.
TITANS OF TECH
The CEO of AT&T is on a mission to restore his company to greatness. His plan: Use the Internet to unplug the competition.
By John Battelle, November 2004 Issue
Is David Dorman a telecom lifer or a startup survivor? In truth, he’s both. He started out working at Sprint, then became CEO of Pacific Bell, where he created the first regional-phone-company Internet service provider. He then took a detour into the dotcom world, where he led PointCast, a much-hyped “push” technology company, until shortly before it went under. Chastened, he returned to the business he knew best: telecom.
But as it turned out, someone who’d tried out an untested new business model was exactly who Ma Bell would need. When Dorman joined AT&T (T) in late 2000, then-CEO Michael Armstrong held a grand vision for integrating what Dorman calls the “magic five” — local, long distance, high-speed data, wireless, and video. But things didn’t turn out as planned. Instead of reigning over a vast telecom empire, Dorman ended up leading AT&T through the most perilous period in its 127-year history. Teetering finances forced Armstrong to divest wireless and cable. Factor in a recent regulatory decision that Dorman claims left him no choice but to abandon AT&T’s residential phone business — which represents about 25 percent of the company’s revenue — and it’s no wonder Wall Street is tepid about AT&T’s prospects.
Dorman responds by pointing out that AT&T is the clear leader in providing networking to Fortune 500 companies, and, he says, his competitors are in shambles. More intriguing, he has a strategy to put AT&T back on top.
It’s clear that Dorman grasps the disruptive nature of the Internet. Right now the Net is changing voice — Dorman really lights up when you ask him about CallVantage, AT&T’s voice-over-IP service. But at some point, it could lead to video-over-IP, a potential competitor to cable. Add it all up — the old long-distance and high-speed data businesses, CallVantage, a new wireless play, maybe even video — and Dorman may be rebuilding AT&T into the company he once thought he would lead, one magic-five application at a time.
When you announced you were leaving the residential telephone business, your share price dropped. Why do you think the markets reacted negatively?
We don’t have to have residential telephone business to be a successful company. So many of the stories I’ve seen say, “They’re going to go away. It’s over.”
That question’s on my list here …
This is a $30 billion company, and consumer is $8 billion of that. I’ve got the best business-services franchise in the world. And I’ve got a leper colony of competitors. We know what MCI’s been through. Sprint — they’re a wireless company, just ask them. And you look at the rest of the guys — Qwest (Q), XO Communications, Wiltel, Level 3. Is a major company like Citigroup (C) or J.P. Morgan Chase (JPM) going to bet on someone like that vs. going with us?
Your industry has not covered itself in glory these past five years — MCI, for starters.
You know something people didn’t understand? A big part of Tyco’s (TYC) value was TyCom — an optical network. And Enron had $30 billion-plus of its market cap based on its broadband-trading business. So the three biggest frauds in American history had a direct impact on telecom. Add Qwest and Global Crossing, and we had five major catastrophes in the industry. AT&T didn’t cause that; we just have to deal with the aftermath.
Must be fun to be a telecom CEO.
It was a great thing 10 years ago. We’re in a cycle. The most frustrating, gut-wrenching thing for me is, I can’t tell you how long the cycle’s going to last. But the overcapacity will get reconciled. If we didn’t have Qwest fighting for its life and MCI fighting for its life, prices would stabilize.
(more in extended entry…read on, it’s a fun one)