King Ed Walks into the Sunset

Ed Whitacre, having realized his dream to put together AT&T (well almost) is walking into the sunset, ready to hang up his gun sling, and enjoy life. The AT&T CEO is going to hand over the reins of the sprawling Ma Bell Empire to his longtime heir apparent Randall Stephenson on June 3, 2007.

An industrial engineer from Texas Tech University, he started off at Southwestern Bell, and climbed his way to the top, becoming the CEO of SBC Communications in 1990. Since then an aggressive acquisition strategy outlined by Whitacre saw SBC gobble up its Baby Bell peers – Pacific Bell, Ameritech, and BellSouth – and others like AT&T and Cingular Wireless. In its most recent quarter, AT&T had $28.97 billion in revenues and $2.85 billion in profits.

Widely regarded a tactician, with a can-do-cowboy attitude, Whitacre was viewed as a worthy (and to be feared) comptetitors by others.

It is as good a time for him to retire. The company, just reported a stellar quarter, and even the much maligned U-Verse is seemingly doing better. In 2006, the stock was up 40%. There is a glow of pink around the company. It is also now the largest broadband provider in the U.S. The company has done a good job of creating an earnings momentum through margin improvements, cost cutting and superior management.

“I leave with complete confidence in the future of our great company… Randall Stephenson is an exceptional leader. He has a deep understanding of this business and a clear sense of where it should go.”

However significant challenges remain. The pitched battles with cable operators are only going to get bloodier. There is high risk going forward for the company as it keeps losing voice customers to its cable rivals. And there is the whole net neutrality mess that some say Whitacre started, sure to account for lots of billable hours on Capitol Hill.

Its broadband business, benefiting from discount plans, will come under strain as cable operators use bandwidth speeds as leverage. There are rumblings that the video-DSL based solutions might be slow to roll out, mostly due to technology challenges, none of AT&T’s making. Maybe it is time for Stephenson to handle the future problems.