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While telecommunications experts were shocked by the magnitude of the proposal, it would merely be the latest in a string of major divestitures by ITT. Since he took charge of the company in 1979, Chairman Rand Araskog has spun off some 95 businesses worth about $4 billion. Meanwhile, he has channeled resources into such prized divisions as the Hartford insurance company and the Sheraton chain of 488 hotels and resorts. Says Herbert Goodfriend, a telecommunications analyst at Prudential-Bache: "Araskog is dismantling Harold Geneen's empire...
...however, ITT appears on the verge of pulling up its roots. In a startling disclosure, company officials said last week that they were negotiating to sell virtually their entire telecommunications business, which has an especially strong presence in Western Europe, to France's state-owned Compagnie Generale d'Electricite, for an estimated $2 billion. If the deal goes through, it would give CGE (1985 sales: $11 billion) a hefty 12% of the global telecommunications market, making it No. 2 behind AT&T. ITT (1985 sales: $20 billion) would maintain a 30% interest in the businesses sold to CGE but would...
Araskog has good reason to want to shed much of the ITT communications network, particularly System 12, a computerized switching board that telephone companies use to route calls. The unit, which cost $1 billion to develop, sold well after it was unveiled in Europe in 1979, but it has turned a profit only in West Germany and Italy. Araskog thought that if he could adapt System 12 to U.S. standards, he could sell it to the regional Bell companies, which were formed after the AT&T breakup in 1984. But ITT was unable to write software that would mesh System...
...Dutch partner, Philips. In that deal, AT&T-Philips would have taken over 16% of France's telephone network in return for helping a CGE subsidiary, Alcatel, market telephone equipment in the U.S. The French government, however, failed to approve that agreement, and could block the ITT deal. But if France consents to the sale, CGE will become a sort of pan-European counterweight to AT&T. Says one journalist from the French newspaper Le Figaro: "This could be our telephonic Airbus...
Wall Street shares that optimism. When rumors of the sale started flying on Wednesday, ITT stock jumped $4, to $49.37. It closed the week at $54. Still, many industry watchers are taken aback. Quipped Carol Neves, an analyst with Merrill Lynch, to the New York Times: "It's difficult to comprehend an ITT without a telecommunications operation. I asked them what the T's would stand for in their name, and they said, 'toil and trouble...