ITT's break-up is the latest swing of the pendulum for the White Plains, N.Y.-based company. It began life in 1920 as Puerto Rico Telephone Co., and expanded rapidly in the following decade to Spain and other European countries. By the 1950s it was expanding into television and other communications lines.

But it really exploded under master conglomeratist Harold Geneen, who in the 1960s gobbled up more than 300 companies, often exploiting the latest financial innovations such as leveraged buyouts and hostile takeovers. It sprawled far beyond communications with units like Sheraton hotels, Hartford insurance and Avis rent-a-cars. Its reach was so broad it was implicated in the Chilean coup of 1973 that toppled Salvador Allende. By the 1990s, however, ITT had begun paring itself down. And in 1995, it splintered into three companies, severing its hotel and insurance businesses and focusing on the defense unit.

Popular in the Classroom, Too

The urge to de-merge is popular with finance professors as well as portfolio managers.

Many of the claimed benefits of conglomeratization are simply "financial engineering," in the words of New York University economics professor Richard Sylla.