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Break up AT&T?

Suspense is building among AT&T watchers over a board meeting this week in which Liberty Media Chairman John Malone is expected to press his case for restructuring the company.

Malone is publicly and privately pushing AT&T Chairman Michael Armstrong to shuffle the company's assets in an attempt to boost its sagging stock price. The price has dropped about 50% since November, dragging with it the value of the 33 million-share portfolio Malone received pursuant to AT&T's takeover of MSO Tele-Communications Inc. He has sold or given away about 25% of those shares for $444 million but has watched the remaining stock drop in value from $1.5 billion to about $744 million.

Malone, the consummate financial engineer, hates falling stock prices even more than he hates paying taxes. The company's largest individual shareholder, he has been grousing for months that Armstrong needs to restructure the company, suggesting such moves as spinning off divisions, separating the cable business from the rest of the company, and shedding the sluggish long-distance unit.

AT&T directors are scheduled to meet on Thursday for an annual strategic review of the company's operations. The tension is so high that traders boosted AT&T's stock price last Wednesday on a flimsy rumor that Armstrong was being ousted and replaced by Malone.

Industry executives expect a lot of frank talk during the two-day meeting. "John has an agenda," said one Wall Street executive close to Malone, "and he's campaigning for a change."

Armstrong is countering with an effort to stay the course. Yes, long distance is a problem business, but that's why he has made his $100 billion push into cable. The second-quarter earnings snag at the business-services unit was a short-term hiccup, his supporters argue.