[it_does_follow]

Being reputable and being a vanity division are not mutually exclusive.

You could argue that at it's peak Bell labs was a vanity division. That research may have changed the world, but very little of it likely ended up benefiting AT&T in any major way financially. It's telling that once AT&T was broken up Bell labs, while existing in some form for years after, was never reestablished.

[freyr]

Bell Labs still exists but is owned by Nokia, who now makes cellular infrastructure. AT&T Labs also exists.

But the days of telecom research making rapid and monumental advances peaked decades ago. Nokia or AT&T or Huawei or Ericsson could quadruple their R&D spending and it wouldn’t reestablish the impact of Bell Labs of last century, because it’s simply a much more mature field.

Whether it was a vanity division or not, it did serve one practical purpose for AT&T: it presented the company as a benevolent monopoly, spending its profits on developing technologies that benefitted the nation. This helped stave off anti-trust action for a long time.