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BREAKFAST WITH THE FOOL
AOL Wants AT&T Broadband

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By Rex Moore (TMF Orangeblood)
September 10, 2001

It appears that AT&T (NYSE: T) has another serious suitor for its cable television unit, known as AT&T Broadband. The Wall Street Journal, citing people familiar with the situation, reported this morning that AOL Time Warner (NYSE: AOL) has offered to merge AT&T Broadband with its Time Warner Entertainment unit. Because both companies are already partners in that unit, such a deal would allow AT&T to retain majority control of the new venture.

AT&T's board rejected Comcast's (Nasdaq: CMCSK) $40 billion stock swap offer in July, and since then various companies have been involved in talks for the broadband unit, including Cox Communications (NYSE: COX), Disney (NYSE: DIS), and Microsoft (Nasdaq: MSFT).

AT&T Broadband is already the largest cable system in the United States, serving about 16 million households. A merger with AOL and its Time Warner cable unit would create a monster company reaching nearly 30 million households, or roughly 40% of U.S. cable subscribers.

That likely won't sit well with regulators, however, or with competitors. You may recall a report in The Financial Times in late July that indicated Microsoft would go to great lengths to prevent AOL from acquiring AT&T Broadband, including helping rival bidders financially.

So with other companies still in the running, and with Microsoft ready and willing to throw a few monkey wrenches around, this entertaining drama seems far from over.

News to Go

As evidence of the growing rift between the U.S. Justice Department and the states involved in the antitrust battle against Microsoft, California and New York attorneys general say they'll pursue their own sanctions against the software company if they're not satisfied with the government's handling of the case. Last week Justice said it would not seek to break up Microsoft as part of the sanctions for abusing its monopoly status, a move that caught the 18 states involved by surprise.

Veritas Software (Nasdaq: VRTS) hopes its battered stock price will get a boost today. According to CBS MarketWatch, the maker of storage management and data protection software will introduce "Veritas Database Edition 3.0" today for software giant Oracle (Nasdaq: ORCL). The product, which was co-developed with Oracle, will provide more efficient data access on corporate networks.

Dutch telecommunications company KPN (NYSE: KPN) will be introducing a new CEO today, according to The Wall Street Journal. The Journal reports that Paul Smits is stepping down as head of the troubled company, whose shares hit a record low Friday.

RF Micro Devices (Nasdaq: RFMD) said this morning that its second-quarter results should "significantly exceed" its earlier expectations. CEO David Norbury said "We are seeing increased order activity and revenue growth from multiple customers and across all major air interface standards." The maker of radio frequency integrated circuits (RFICs) for the wireless industry now expects to see 30% sequential revenue growth for the quarter.

The Asia Pacific Economic Cooperation Forum wrapped up yesterday in China with Treasury Secretary Paul O'Neill predicting a quick economic recovery for the U.S. The Associated Press says O'Neill is looking for a 3.2% growth rate next year. The U.S. growth rate for April through June this year was 0.2%. In an entirely unrelated matter, Yankees right fielder Paul O'Neill sat out last night's game against the Rex Sox, still bothered by a hip injury.

Rex Moore was born in Amarillo, Texas, so he could be close to his mother. At press time he owned shares of Microsoft, but no other companies mentioned in this article. The Motley Fool is investors writing for investors

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