WorldCom Plans to Create Four New Internet Divisions
Jackson, Mississippi, Jan. 29 (Bloomberg) -- WorldCom Inc.
plans to split its data businesses into four divisions after
buying CompuServe Corp. this weekend, advancing a strategy
designed to provide corporations with every Internet service,
executives familiar with the plan said.
One of the four divisions will offer Internet hookups for
the online services of Microsoft Corp. and America Online Inc.,
the executives said. The others will help companies conduct
business over the global computer network.
WorldCom is moving quickly to take advantage of its new
Internet assets, which include America Online's network gained in
the CompuServe purchase. When WorldCom buys MCI Communications
Corp. this year, the joined companies will control about 60
percent of the world's Internet traffic.
''The future is data, and they're covering all the bases,''
said Jeffrey Kagan, president of market researcher Kagan Telecom
Associates.
WorldCom is scheduled to complete its $1.2 billion purchase
of CompuServe Saturday. It will trade customers of CompuServe's
consumer online service for America Online's ANS Communications
unit. ANS offers Internet services to 37 of the world's top 100
companies.
Both ANS and CompuServe bring big customers to WorldCom. ANS
has accounts with McGraw-Hill Cos., Fannie Mae and FDX Corp.,
formerly Federal Express. CompuServe has Visa International Inc.,
Citrix Systems Inc. and HBO & Co., which designs and sells
computerized information systems to the health-care industry.
New Setup
WorldCom's four divisions will include one to handle
customers who dial into Microsoft's MSN -- a current customer of
WorldCom's UUNet Technologies Inc. unit -- and America Online,
according to the executives.
As part of the transaction, AOL is signing a five-year
contract with WorldCom. The total revenue for such dial-up
services including AOL and MSN was $4.8 billion last year,
according to TeleChoice Inc., a consulting company.
The second division will provide Internet access for
businesses via a flat-rate pricing plan.
The third will handle complex networking services for
businesses, such as preparing and maintaining a company's Web
site and sending orders and other information over the Internet.
The fourth will give multinational companies links to remote
offices around the globe.
John Sidgmore, WorldCom's vice chairman and chief operating
officer, is spearheading the combination efforts, the executives
said. WorldCom, CompuServe and ANS officials declined to comment.
Internet Expert
For WorldCom, getting the combination right is critical.
''The winners in the Internet race will really be the
winners of the whole thing,'' Sidgmore said in a speech yesterday
at a NationsBanc Montgomery Securities conference in San
Francisco.
UUNet already is the world's largest provider of Internet
hookups for businesses and one of the largest carriers of
Internet traffic. ANS is too.
ANS also brings the expertise of its employees, several of
whom were involved with inventing Internet technology when the
network's predecessor Arpanet was formed about 30 years ago for
the National Science Foundation.
Combining UUNet and ANS's so-called ''backbones,'' or pipes
that carry information over the global computer network, will
give WorldCom a large portion of the revenue other Internet
service providers pay to hook up to the network.
Every time AOL's 11 million customers dial up to use the
service, for example, their calls will be carried by WorldCom.
Most important for WorldCom, its new CompuServe and ANS
units are the leaders in setting up and managing networks for
businesses.
''CompuServe is a unique strength in the marketplace,'' said
David Goodtree, an analyst at Forrester Research. ''They're the
best at complex network integration.''
Combining CompuServe's networking genius with ANS's Internet
expertise is a key part of WorldCom's strategy. WorldCom also can
sell long-distance and local phone services to the companies,
making the accounts more lucrative.
To be sure, putting all of the pieces together won't be
easy. And digesting the complex Internet businesses could stunt
their fast-paced growth if WorldCom isn't careful, analysts said.
''The bigger a phone company gets, the slower and less
innovative it gets,'' Forrester's Goodtree said.
Should one company be allowed to control 60% of the Internet traffic?
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