John Zeglis, who was named Wednesday to head operations at AT&T Corp., is the early front-runner to replace John Walter and become heir apparent to Chairman Robert Allen, analysts and people close to AT&Ts board said Thursday.
This time, AT&T will look for an executive ready to take on the job of chairman and chief executive officer, and not a test-run president who could become a CEO in time, as was the case with Walter.
AT&T board members have said they wanted a candidate with a better grasp of strategic issues and one ready to step up quickly as leader.
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Walter resigned Wednesday after the AT&T board decided not to elevate him to CEO on their original schedule. He had been president and chief operating officer since joining AT&T with limited experience in the telecommunications industry, having spent his career at R.R. Donnelley & Sons Co., a printer. In June, Zeglis became AT&T vice chairman after years of serving as legal counsel, the chief advocate before regulators, and in various strategy-setting roles. He played a key role in structuring the breakup of AT&T in 1984.
There is at least a 50 per cent chance that the board will select Vice Chairman John Zeglis, Daniel Reingold, a veteran telecommunications analyst, said in a research note Thursday.
This would be less tumultuous for the company, its employees and shareholders, Reingold wrote. The company can ill afford another unsuccessful headhunt. Beset by competition in its core long-distance market and facing the need to make heavy investments to compete in new markets, AT&T must act quickly to quiet management turmoil.
AT&T stock fell on the renewed uncertainty at the nations largest long-distance company, losing $1.31 to $35 and was the second most active issue on the NYSE.
One person close to the board said AT&Ts directors plan to make no mistakes in this second executive search.
The board will be looking for a clear successor to Allen, someone to run the company, the source said, adding that other candidates than Zeglis will be considered.
I think the board has learned from this (Walter) episode that they need someone with the intellectual capacity to understand the shifts that are going on in AT&Ts (markets), he said.
AT&T board member Walter Elisha, chief executive of Springs Industries Inc., said in a conference call Wednesday that Walter lacked the intellectual leadership to hold the reins at AT&T.
What the board members are looking for is a kind of counterpart to Microsofts (Bill) Gates or Intels (Andrew) Grove or Lew Platt of Hewlett-Packard, the source said.
Other candidates being considered include George Fisher, chairman of embattled Eastman Kodak Co., who recently joined the AT&T board of directors, the sources said.
Fisher is credited with engineering a turnaround at Motorola Inc. several years ago and is seen as a man with enough stature to immediately step into Allens shoes.
Another AT&T board member said to have a shot at the job: Ralph Larsen, former CEO at Johnson and Johnson, who is said to understand technology-driven businesses like AT&T.
Last fall, several major candidates reportedly passed on the job after being asked to defer until Allen was ready to step aside.
The big-name CEOs all wanted Allen to retire, analyst Chris Landis of consulting firm TeleChoice said. That was one of the things that kept AT&T from getting a candidate of the calibre of GEs Jack Welch or IBMs Lou Gerstner.
For now, analysts give Zeglis the inside track, although they note he has no experience running an entire company. His new responsibilities are designed as a test of his abilities, they said.
The search today is just as difficult at it was nine months ago, said Tom Nieman, a partner in Ramsey/Bierne, an executive search firm based in Ossining, N.Y.
Ramsey/Bierne was instrumental in luring Alex Mandl, the one-time heir apparent to Allen, away from AT&T last year, precipitating the scramble that led to Walters hiring.