In a move analysts predict will help both companies realizetheir full value, Williams has begun the first steps to separateits energy division from its communications businesses. The boardof directors of the Tulsa, OK-based company voted Sunday to beginthe process, which is expected to take about 18 months.

Though the company had not announced a specific plan on Monday,the change from the current ownership structure will hinge onseveral factors, including assuring Williams’ shareholders thatthey will receive favorable tax treatment. Williams sold about 15%of Williams Communications last October in public and privateequity offerings. It retains the remaining 85% interest.

In a statement, CEO Keith Bailey said the company thought thesteps were “the best way to ensure that both our energy andcommunications businesses have the efficient and effective accessto the capital necessary to pursue the substantial growthopportunities that each enjoys.”

Based on the news, JP Morgan yesterday upgraded its stock ratingfor Williams to “buy” from “long-term buy.” Also, Goldman Sachs”strongly reiterated” the stock, with a $60 target price. Goldmansaid if the stock traded in line with its peers, its shares wouldtrade for about $80 per share. Shares yesterday were up, tradingaround 43 ¬.

In June, Williams’ energy division said it expected that itssecond-quarter results would exceed the current consolidated FirstCall consensus estimates because of the “strong” energyenvironment; rate refund liabilities related to its Williams’Transcontinental gas pipeline system; and an after-tax gain ofapproximately 24 cents a share related to the investmenttransaction announced in June by Williams Communications.

On June 27, Williams Communications announced that it expectedto include in its second-quarter results a pretax investment gainof nearly $200 million resulting form its exchange of 11.3% commonstock investment in Concentric Network Corp. for common stock ofNEXTLINK Communications Inc. That merger was announced June 19.

Williams Communications is expected to release itssecond-quarter results Thursday, and the corporation will issue itssecond-quarter earnings the following day.

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