AT&T; Board Weighs Next Chief Executive

NEW YORK —  AT&T; Corp.’s board of directors met Wednesday to ponder the selection of a new chief executive--a pivotal decision that could determine the future direction of the beleaguered phone giant--but broke up without an announcement.

Speculation on a successor to Robert E. Allen has focused largely on two contenders--insider John D. Zeglis, AT&T; vice chairman, and outsider C. Michael Armstrong, chief executive of Hughes Electronics Corp., a Los Angeles-based unit of General Motors Corp.

Others reportedly under consideration are Richard Brown, chief executive of Britain’s Cable & Wireless; Henry Schacht, chairman of Lucent Technologies Inc.; James Barksdale, chief executive of Netscape Communications Corp.; and Brian Thompson, chairman of LCI International Inc.

The board is under pressure to make a decision quickly, as there is an appearance that the phone giant has been running in place while its long-distance market share shrinks and competitors scramble to implement their strategies.

“If they sit around too long, they’ll keep losing ground,” Collins & Co. analyst Bruce J. Raabe said Wednesday.

At least twice, AT&T; thought it had its succession plans nailed down.

But in August 1996, Allen’s heir apparent, AT&T; President Alex J. Mandl, resigned to form the telecommunications start-up that is now Teligent Inc.

AT&T; surprised the industry two months later by turning instead to a man with no telephone industry experience, John R. Walter, chief executive of printing company R.R. Donnelley & Sons Co.

Walter’s term as AT&T;’s CEO-in-waiting lasted only nine months, however. He resigned in July, having lost the board’s confidence.

Analysts said the choice of Zeglis, 50, a lawyer who was the architect of AT&T;’s spinoff last year of Lucent and computer maker NCR Corp., would please AT&T; employees as a sign of loyalty and assure continuity in management.

“If Zeglis is not part of the equation, you’re looking at a much different AT&T;,” said analyst Brian Adamik of Boston’s Yankee Group.

Armstrong, 59, who was first approached about the job more than a year ago, turned it down because Allen would not be retiring for a year. Although Allen reportedly now plans to step down immediately after a successor is named, Armstrong’s availability is no longer certain.

The Wall Street Journal reported this week that some AT&T; directors would even favor AT&T;’s making a bid to purchase Hughes if that’s what it takes to land Armstrong.

Armstrong has declined to discuss the issue.

After the black eye the board received from choosing Walter, some experts expect a conservative pick this time around.

“I think they will gravitate to the closest thing they have to a sure thing,” Adamik said. In his view, that would be Zeglis, perhaps with an experienced, older executive, such as Lucent’s Schacht, to act as interim chairman.

“I think the decision is already made, but they’re just not telling us,” Adamik added.

AT&T; shares closed at $44.88 on the New York Stock Exchange on Wednesday, down $1.13.