WorldCom to Face Investor Anger, Concern
Reuters Business Report
By Jessica Hall
biz.yahoo.com
PHILADELPHIA (Reuters) - WorldCom Inc.'s (NasdaqNM:WCOM; NasdaqNM:MCIT) first annual meeting without former Chief Executive Bernie Ebbers may feel more like a grieving family in need of therapy than a gathering of investors seeking a financial update on the embattled telecommunications company.
In Friday's meeting in Clinton, Mississippi, where the company is based, WorldCom must deal with shareholders' anger over the 90 percent drop in its stock and regain their trust that it can fulfill its promises to pare its $30 billion debt load and boost revenue growth, analysts said.
Since last year's meeting, WorldCom has fired about 6,700 workers, cut its growth forecasts and come under scrutiny by federal regulators for its accounting and loans to co-founder Ebbers, who resigned in April as the company's financial problems mounted.
Besides all of the bad news, shareholders must adjust to the loss of Ebbers, the brash executive whose personality defined the company he built from a long-distance reseller into a global company serving 65 countries.
Many of WorldCom's shareholders are residents of nearby Jackson, Mississippi, and had viewed Canadian-born Ebbers -- who opened shareholder meetings with a prayer -- as their adopted son.
"Worldcom investors are a family. It's all the barbers and school teachers and firemen from Jackson and the local small towns," said independent telecommunications analyst Jeffrey Kagan.
"And they're all disappointed. They have to get through the anger in the beginning by saying that they understand that a lot of people lost a lot of money ... they'll acknowledge it but say let's keep it in perspective. It hasn't just happened to us. It's happened to the whole industry," Kagan said.
GETTING BACK TO BUSINESS
In the past, Ebbers would mill around with shareholders before the meetings, asking some long-time investors about their grandkids and looking at family photos.
By comparison, Ebbers' successor and WorldCom's former vice chairman, John Sidgmore, appears more business-like and analytical in temperament. Sidgmore is not expected to announce any major news or unveil his long-term strategy for the company at the meeting.
Instead, analysts said Sidgmore will emphasize what he's done over the past six weeks to fix problems and set Clinton, Mississippi-based WorldCom on the right path.
"Management still has confidence in this company as a going concern, and I think they will try to instill that confidence in their shareholder base," said Tim Ghriskey, of Connecticut-based investment management firm Ghriskey Capital Partners. He said management was likely to "press the view that the liquidity situation is very adequate and the steps they've taken to shore up the balance sheet."
So far, Sidgmore has scrapped the company's tracking stocks and dividend payments, saving $284 million a year, and set plans to sell the unprofitable wireless resale business. He lined up a $1.5 billion credit line and is in talks to secure $5 billion in new funding to help pay off some of WorldCom's $30 billion in junk-rated debt.
MORE WORK TO DO
WorldCom can blame some of its woes on widespread industry pressures, such as stiff competitions, scant demand for data services in the weak economy and a glut of fiber optic networks.
But the accounting investigations and the departure of Ebbers, who must repay $408 million in debts to the company, rattled investors' confidence about a company they once cheered as a small-town success.
But there's a lot more to do. Analysts expect WorldCom to cut its capital spending budget by another $1 billion to about $3.5 billion, and media reports said the company may cut up to 16,000 additional jobs or 20 percent of the work force.
"Cost savings, however, can only be one half of the story. A major work-force reduction naturally raises questions of the company's future growth prospects and ability to maintain customer service levels with the reduced head count," said JP Morgan analyst Marc Crossman.
"The company will need to demonstrate its ability to restore growth, particularly to its core data and (Internet) business segments before we see any material revaluation," Crossman said. |
