JOHN SIDGMORE: SELLING THE WORLD ON WORLDCOM
He is point man in its Net expansion
strategy
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It was a hint of the wild ride to come for UUNET Technologies Inc. President
John W. Sidgmore. As Reba McEntire belted out country songs onstage,
WorldCom Inc. Chief Executive Bernard J. Ebbers danced in the aisles of
Nashville's Opryland Hotel with the trim Sidgmore on his shoulders. The
occasion? A celebration last year of WorldCom's $14 billion acquisition of MFS
Communications Co. and its Internet division, UUNET. ''It was a little scary,''
recalls Sidgmore. ''Like being in a mosh pit.''
He has gotten used to the feeling. Ever since Sidgmore teamed up with Ebbers,
he has found that he and WorldCom are about as welcome in the telecom
industry as slamdancers at a ballroom waltz. In October, WorldCom launched a
hostile bid for MCI Communications Corp. and eventually wrested MCI away
from British Telecommunications PLC and GTE Corp. Now, U.S. and European
regulators are threatening to scuttle the $37 billion deal because of antitrust
concerns.
The issue: Regulators fret that Sidgmore's UUNET already carries so much of the
Internet's traffic that the addition of MCI's Net business would give him enough
control to squeeze out other Net players. The European Commission held
hearings on the issue in Brussels in mid-May where rivals claimed the combined
companies would control more than 40% of Net traffic. Sidgmore, also
WorldCom's vice-chairman, argued that their share is closer to 20%. Insiders,
however, say that executives already are trying to placate trustbusters by finding a
buyer for MCI's Net operations. British Telecom and GTE are both interested in
the unit, the insiders say.
''EVANGELIST.'' It's classic Sidgmore. A salesman at heart--he spent the first
decade of his career selling everything from calculators to time on mainframes--he
will go to great lengths to close a deal. The Worldcom-MCI merger is no
exception. Sidgmore might see a worthwhile trade-off in selling MCI's Net
business even though WorldCom could lose customers who get a package of
MCI long-distance and Internet services.
He's done this kind of deal before. Take the agreement he wrangled out of
Microsoft Corp. in 1994. By giving up a 15% stake in UUNET, he attracted a
critical $12 million investment from Microsoft and got the software giant to pony
up $100 million a year to pay for UUNET's networking gear. And then there is
the deal he landed with No. 1 online service America Online Inc. In the fall of
1997, Sidgmore cinched a contract by engineering a complex three-way
arrangement that gave AOL more customers and gave UUNET AOL's traffic.
''Sidgmore was the architect and evangelist for the deal,'' says the online service's
CEO, Stephen M. Case, who will now join WorldCom's board. ''He wouldn't let
it go.''
At 47, Sidgmore is a workaholic who combines the cheerleading spirit of a high
school coach with a salesman's determination to close a deal. He sends E-mails
to co-workers at 2 a.m. or later and is so focused on work that he often forgets
the little things: He has had his credit cards and car-phone accounts cancelled
several times, so now he pays them three months in advance.
POKER PLAYER. Sidgmore is no less dogged about keeping his troops
happy. In 1994, he nixed the idea of a security door to wall off the executive
suites because he wanted workers to visit him anytime. And when the company
went public in 1995, Sidgmore insisted that employees receive the block of stock
normally reserved for special friends of the company. His staff has responded
with shouts of geek approval during meetings--such as ''John, have my children.''
Sidgmore will need all his smarts, charm, and dealmaking skills in negotiations
with trustbusters. The data networks of WorldCom, MCI, Sprint, and GTE are
much like an intricate web of highways. Now, the carriers typically don't charge
each other fees if traffic from one carrier travels over the network of another. If
Sidgmore oversees a dominant share of the Internet system, rivals worry he could
set up the equivalent of toll booths and start charging his competitors unfair prices
to use his network.
Rubbish, says Sidgmore. ''The notion that we will hurt them is preposterous. The
Internet doesn't work if major players don't cooperate,'' he says.
Sidgmore is mulling over several options to satisfy regulators, according to
sources close to WorldCom. In addition to selling off MCI's Net business, he's
considering a promise to keep UUNET's network available to all rivals at
reasonable prices. He's also toying with spinning off two small networks he got
from Compuserve Inc. and AOL.
Rival GTE, however, says that's not enough. GTE general counsel William P.
Barr is pushing for a more extreme solution: that WorldCom sell UUNET to get
MCI. ''Sidgmore wants to build a network that dominates the Internet,'' he
charges. Sources close to WorldCom say executives would balk at such a
proposal. Sidgmore declined to comment on specific antitrust solutions.
Whatever deal he cuts, Sidgmore is convinced that WorldCom's future depends
on its Internet business. ''When the traditional voice market grows 8% to 10% a
year, compared with the 1,000%-a-year growth on the Internet,'' he says, ''it
doesn't take long for the Internet to be the dominant piece in the industry.'' In
1998, WorldCom expects $2 billion in Internet revenue, accounting for more than
20% of its total sales and 40% of its growth. That's up from $600 million in 1997,
or 7.5% of total sales.
Given Sidgmore's roots, it's surprising that he's anywhere near the first big
antitrust debate about the Internet--let alone at the center of it. Four years ago,
the Internet was only beginning to gain popularity with corporations, and
Sidgmore had recently taken the job as chief executive of a Computer Sciences
Corp. subsidiary after a 14-year career in sales at General Electric Co. When the
call to recruit him came, his first reaction was: ''I can't possibly join a company
called UUNET; it sounds like Wee-Wee Net or Yo-Yo Net.'' (It's pronounced
You-You Net).
But Sidgmore, who loves to play poker, liked the potential payoff--and he cut
himself a sweet deal, including a $200,000 signing bonus and a 7% stake in the
company. ''I was joining a company that could blow up,'' he says. ''But if I made
something out of it, I could have the tiger by the tail.''
Indeed, Sidgmore has succeeded by betting against conventional wisdom. One of
his most critical moves was his refusal to imitate AOL by pursuing residential
customers. Instead, he followed the money--to corporate clients. As a result, in
1995, UUNET was the first Internet company to turn a profit. ''There was
tremendous pressure for us to go to consumers, but we were never going to be
able to compete,'' says Sidgmore. Adds John Jarve, a venture capitalist at Menlo
Ventures, one of the company's first three investors: ''It's the most important call
he ever made.'' Now, rivals like PSINet Inc. that bet on the rocky consumer
market have switched gears.
SPEED GOLF. Sidgmore's drive to succeed started early. When he was just
13, he began earning $1 an hour by helping to calculate clients' tax returns for his
father, a self-employed CPA who went blind. The young Sidgmore, a native of
suburban Spring Valley, N.Y., attended the State University of New York in
Oneonta to remain near his father and graduated with a degree in economics. His
first job out of college was selling Rockwell International Corp. calculators.
Today Sidgmore is worth $130 million, but he's not interested in kicking back to
enjoy his wealth. Even on the rare days he takes time off, he plays three-hour
speed golf with a cellular phone glued to his ear.
Sidgmore won't have much time for the links as he meets with trustbusters in the
months ahead. European and U.S. regulators are expected to make a decision on
the merger by July. Sidgmore insists that there's little chance the Internet fuss will
upset the merger with MCI, primarily because it's driven by synergies between
MCI's long-distance and WorldCom's local phone businesses. Still, Sidgmore
may have to trot out his best slamdancing to get this deal done.
By Catherine Yang in Washington, with Peter Elstrom in New York
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