From Smartmoney
smartmoney.com
MCIWorldCom Takes a Wild Ride
By Rebecca Thomas
MCI WORLDCOM
WCOM 78.13
-4.56 -5.51%
SPRINT CORP(FON GROUP)
FON 67.00
-2.38 -3.43%
AT&T CORP
T 54.81
-1.06 -1.90%
DJIA
10998.39 120.58
Nasdaq
3353.71 17.55
Rus. 2000
453.67 -0.41
12/1/1999 4:30PM ET
SHARES OF MCI WorldCom (WCOM) tanked this afternoon and moved up to top the Nasdaq volume-losers list after CNBC reported that Lehman Brothers had slashed revenue estimates for the telecom giant. That, in turn, sparked rumors that MCI WorldCom would issue a revenue warning.
While telecom stocks were mostly lower in afternoon trading, MCI WorldCom sank further than most ? the stock lost 7% before recovering a bit. But it still ended the day down 5.5% at $78.13. MCI spokeswoman Barbara Gibson says the firm does not comment on rumors and speculation.
Today's selling frenzy started after CNBC's David Faber said Lehman Brothers had lowered its fiscal fourth-quarter estimate to 14.5% from a previous 16.6%. Earnings estimates, according to CNBC, were left unchanged. While Lehman's telecom analyst, Blake Bath, was traveling and couldn't be reached for comment, the woman answering his phone confirmed that revenue estimates had indeed been lowered but that no research note detailing the move had been issued. She then hung up.
Seems Bath has dramatically changed his tune. Just last month, the analyst upped his fourth-quarter revenue growth estimate after MCI WorldCom beat his revenue expectations in its fiscal third quarter. At that time, Bath noted that WorldCom had made "significant progress in shifting [its] revenue mix towards the growth areas of the industry." He pointed out that data, Internet and international services ? which represent 39% of total sales ? were more than offsetting weakness in voice revenue. In fact, Bath said he had probably been "too conservative" in his revenue outlook.
Confusing the matter further today were comments on Briefing.com that MCI WorldCom bull Jack Grubman of Salomon Smith Barney had reiterated his Strong Buy rating on the stock. But the firm's media relations office said it had no knowledge of any such move. Grubman's last note, says a Salomon spokeswoman, was published on Oct. 28.
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