Yet as this bear market drags on, venerable companies are also resorting to shrinking their total shares in hope of igniting a beaten-down stock. AT&T (T) is the first Dow component to plan a reverse split.

So far this year, there've been 312 reverse splits vs. 334 for all of 2001, and an annual median of 108 from 1990 to 2001, according to Multex. A total of 813 U.S. companies underwent reverse splits to prop up crushed share prices since the bear market began.

Generally, "there's not a lot of large-cap stocks with reverse splits. They're usually micro-cap," said Jon Johnson, chief market strategist of The Stock Split Report. "AT&T is a real surprise."

Yet AT&T is not the only major company reduced to undertaking a reverse split. Last week, Ericsson (ERICD) did a 1-for-10 reverse split. Its shares have traded below $1 since late July - a concern since Nasdaq requires listed stocks to trade at $1 or above. Ericsson trades at about $8 Thursday.

On Oct. 15, Palm (PALMD) began trading under a 1-for-20 split to prevent the shares from being delisted. The stock, which debuted at $100, had been trading at under a buck since August. The stock is hovering around $12.

Former investor darling Lucent (LU) plans to get shareholder approval for a reverse split next year, as is Nortel (NT) Both stocks are trading at about a dollar and a quarter Thursday. Meanwhile, Commerce One (CMRC) did a 1-for-10 in mid-September. Shares hover at $3.

From 1984 to 2000, there has only been one reverse split among the 300 largest companies in the New York Stock Exchange, said Rodney Boehme, a University of Houston professor who studied reverse splits. Eighty-five percent of reverse splits in that period involved companies with under $100 million in market value, and 83 percent were traded on the Nasdaq.

What are reverse splits?

A reverse stock split is the opposite of a straight split: For example, in a 1-for-5 reverse split, an investor with 100 shares worth $3 each will end up with 10 shares at $30. In any case, the value stays at $1,000.

While a split itself doesn't change the market value of a company, it is seen as a signal about its prospects. The market typically interprets a straight split as bullish and a reverse split as bearish, Johnson said.

Reverse splits are "a last ditch effort" to boost a share price when the company's own business cannot under present market conditions, he added. However, "in most cases, it doesn't work."

Companies do reverse splits to boost their stock price, at least in the short run, and stave off a possible delisting. Higher prices lure institutional investors, who typically stay away from cheap stocks with low liquidity - the pool of shares isn't large enough for big investors to easily trade holdings without causing major movements.

Johnson said the cut off price for institutional investors like mutual funds had been $12 to $15, but it's down to $7 to $8 in the bear market

A reverse split also shrinks the number of shares traded, decreasing dilution for companies that have had too many straight splits.

While AT&T is not in danger of being delisted -- trading well above the $1 minimum required by the New York Stock Exchange --analysts believe most of the stock's value lies in its cable assets, which is being sold to Comcast (CMCSK) After the sale, the fear is that AT&T might dive. Shareholders approved a 1-for 5 in July; the Comcast deal is expected to close by the end of the year.

Johnson believes that large-cap companies that do reverse splits generally have a better shot at succeeding than small firms.

Still, Marc Gerstein, director of investment research at Multex, advises investors to stay away from them.

"If I had a company that announced a reverse split, I'd sell it," he said. "I'd rather see them improve operations" to boost the stock.

Some companies even do more than one reverse split, which Gerstein sees as a true sign of desperation. This year, four companies undertook at least two splits: Timber (TBRR) , Knowledge Networks (KNWK) , Career Worth (CRWO) and Midwest Venture (MVHI)

As a result of a 1-for-100 split and a 1-for-250 split, Timber's loss per share ballooned past three digits since the number of shares has shrunk greatly - and too big to fit into Multex's database.

Knowledge Networks has had three reverse splits. "It has no present business or productive assets," Gerstein said. "Enough said."

Career Worth used to sell job listings on CD-ROM, but the Internet foiled its business. It's trying to get into the construction industry.

"In the first half of 2001, I had more cash in my checking account than they had in sales," Gerstein said. "That's frightening."

As for Midwest, Multex describes it as a "development stage company" that "intends to engage in the business of acquiring and developing property." It has no sales but lost $2 million in the first six months of 2002 due to higher general and administrative costs.

"I think I saw this in the Sopranos," Gerstein said. "These are companies you don't want to be owning."

But not all reverse splits have dire consequences.

MicroStrategy (MSTR) did a 1-for-10 reverse split on July 30. The stock closed at 48 cents that day - or $4.80 after the split. On Thursday, the stock hovered at around $12 a share.

Johnson said the reverse split helped the business software company because it accompanied an improvement in operations. Last week, MicroStrategy reported its third consecutive quarterly net income.

Implications for investors

Not only is a reverse split a potential harbinger of sliding stock prices, investors might be forced to cash out if the split ratio is high.

Let's say an investor buys 20 shares of XYZ stock at $80 a share at the height of the bull market. The stock falls to 50 cents. If XYZ decides to enact a 1-for-30 reverse split, it means the investor would hold less than a share - 0.67 to be exact.

Johnson said you would be stuck with that fractional share since brokers deal with whole shares. You could wait for a stock dividend from the company and see if it makes your fraction whole.

"At that point, you're hoping and hope rhymes with dope," he said.

As such, you have little choice but to sell the fractional share to the company when it reverse splits. The company pools all the fractional shares together and sells them - at the current depressed price. You've forced to cash out at a market low.