Ebbers Out As WorldCom CEO
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CLINTON, Miss. (AP) _ Bernard J. Ebbers, whose appetite for acquisitions built WorldCom Inc. into a telecommunications giant only to see its value crushed under debt and a sluggish economy, is out as the company’s president and chief executive.
Ebbers’ successor, John Sidgmore, wasted no time Tuesday talking up the company’s global assets, downplaying questions about cash flow and pledging to create a strategic growth plan for the Clinton, Miss.-based telecom.
Sidgmore, vice chairman since 1996, said he and others on the management team grew frustrated in recent months as WorldCom stock tumbled to lows not seen in a decade.
``I guess we feel like we haven’t done a good job of communicating our strengths to either Wall Street or the press,″ Sidgmore said in a conference call with analysts after the early morning announcement of Ebbers’ resignation.
``My belief is if we can re-energize the management team and put our assets to work in a more focused way around the world, we really believe we can turn this company into a growth story again,″ he said.
Ebbers, who moved out of his office over the weekend, resigned Monday after meeting with board members Friday and Saturday. He could not be reached for comment Tuesday.
WorldCom, one of the darlings of Wall Street a few years ago, has seen investors turn against it in recent months over concerns about the company’s $28 billion in debt and an ongoing Securities and Exchange Commission investigation into lending and accounting practices.
Its long-distance business, the nation’s second largest after AT&T Corp., has also come under pressure from industrywide price discounting.
Ebbers, a Canadian who attended Mississippi College in Clinton on a basketball scholarship, built WorldCom from a small long-distance company into a telecommunications force through more than 60 acquisitions in the past 15 years.
The rapid-fire growth was stopped dead in its tracks in 2000 when federal and European regulators blocked WorldCom’s proposed $129 billion merger with Sprint Corp., citing competition concerns.
Since then, the dealmaking has dwindled and so has WorldCom’s earnings growth. In April, the company said it was eliminating 3,700 jobs in the United States, or about 4.4 percent of its global work force, to better align costs with projected revenue this year.
Sidgmore said he’d spend the next several months evaluating assets and trying to determine how to reduce debt, but his focus will be on growth.
Sidgmore ran UUNet Technologies Inc., now WorldCom’s Internet division, in the mid-1990s and said his relationship with Microsoft was a large reason for UUNet’s growth.
He was WorldCom’s chief operations officer from December 1996 to September 1998.
``The way to get growth in a company like this is to create large deals with large companies, and I do see that as one of my primary roles,″ Sidgmore said.
WorldCom relies heavily on large companies that buy its range of telecom services. Many of those businesses have scaled back operations because of the weak economy, reducing their need for WorldCom’s offerings.
Declining sales have raised questions about whether WorldCom will be able to meet its billions in financial obligations in the next few years.
Sidgmore dismissed those concerns.
``We don’t believe that there’s any way under any scenario that we’re going to run out of cash in the foreseeable future,″ he said.
Company spokesman Brad Burns said Sidgmore would work out of the Washington, D.C., area, but the headquarters would remain in Clinton, a small college town about 10 miles west of Jackson.
Clinton Mayor Rosemary Aultman said Ebbers has always had strong ties to the community.
``I’m very disappointed to see him leave,″ Aultman said. ``This is the company he built. This has to be a personal disappointment for him.″
WorldCom stock, which has lost some 80 percent of its value this year, was up 13 cents, or more than 5 percent, to close at $2.48 in trading Tuesday on the Nasdaq Stock Market, and gained another 5 cents in extended trading. Those shares track the part of the company that sells data and Internet services to large customers. They traded at a high of $64.50 in June 1999.
Shares of MCI Group, created last year to track long distance and other consumer services, were up 31 cents, or 9 percent, to close at $3.75 on the Nasdaq, and gained another penny in extended trading.
Eight equity analysts downgraded WorldCom shares last week, days after the company slashed its revenue and profit forecasts for 2002.
At the same time, bond ratings agencies Moody’s Investors Service, Standard & Poor’s and Fitch all cut their long-term credit ratings on WorldCom’s debt.
In March, two WorldCom stockholders sued the company’s board over $375 million in loans that the company has made to Ebbers. Ebbers has said he has enough personal assets to cover the loans.
``Business conditions remain as challenging as ever, but it seems as if Bernie had been sort of a lightning rod in terms of drawing attention,″ said David Burks, an analyst with J.J.B. Hilliard, W.L. Lyons in Louisville, Ky. ``Maybe his departure lessens some of the negative publicity surrounding the company.″
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