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January 31, 2005

SBC could emerge as a slower-growth company ?


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According to Business Week some Telecom analysts are scratching their heads at SBC's bid to acquire AT&T for 16 billion, in a move touted to push SBC into the enterprise market catering to large corporations and government agencies. Here are some of the quotes - Telecom analyst Daniel Zito of investment company Legg Mason - "From SBC's perspective, it's not obvious to me why they would want to do this now. While big, the enterprise sector tends to generate below-average returns, because of thin margins and high capital costs,"

Telecom investor Michael Mahoney who runs a technology fund for investment company EGM Capital. "AT&T-SBC is a questionable deal at best," -- "I can understand what they're going after, but I think they're going to get a lot of things they don't want and...end up paying more than it's worth." Mahoney, believes AT&T is worth about half the $15 billion to $16 billion SBC may be poised to pay.

Business week cites the continued decline of the enterprise market, high costs to employ sales forces and install the networks that clients need so they can use the outfit's services as potential road blocks for SBC. Even though the enterprise market is not considered bad business for SBC, analyst believe it might make more sense for SBC to expand organically, where they have show great growth so far.







 

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