Business Week has a strong piece on Bernie and WCOM in this week's issue. Major focus on efforts to cut costs and change the "bloated" MCI culture. Generally a positive piece which sheds light on Bernie's style. (And my professor in B-School always said there's nothing more important to know about a company than the CEO's personal style) ...
Its online at
businessweek.com@@ZMHpimUAh2iTiAMA/cgi-bin/premium/issue/premium_frame.pl?url=premium/99_09/b3618109.htm
or
use the link on the home page at businessweek.com
You may have to be a registered subscriber to see the whole article - or see the actual magazine (if anyone still reads from paper!) . If you subscribe to Business Week, you can access their website. Check it out...
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excerpts....
Doc Ebbers' Miracle Diet for MCI
The tight-fisted CEO is remaking MCI in WorldCom's image
Since WorldCom completed its $37 billion acquisition of MCI, Ebbers has brought a new slim-fast management approach to the long-distance company. To pay for the deal, he promised Wall Street that he would slash $2.5 billion in costs, rising to $5.6 billion by 2002. About half the savings in 1999 would come from putting their customers' phone and Internet traffic on each other's networks to avoid leasing links from other companies. What's more, Ebbers wants to ax MCI's overhead--one of the industry's cushiest at 30% of revenues--to about 23% this year. As part of that effort, MCI WorldCom Inc. has laid off 2,215 workers so far.
But there are some who fret that Ebbers will take his penny-pinching ways too far. MCI veterans say that if the cuts deepen, it could destroy the company's key strength--the marketing magic that helped break AT&T's monopoly. MCI is simply different from WorldCom, they argue. While WorldCom, based in Jackson, Miss., has focused on small to midsize businesses, Washington-based MCI excels at snagging consumers and high-end corporate customers--markets where you need to spend money to make money. ''The world has changed for Bernie,'' says a former MCI exec. The company insists Ebbers won't cut core sales and marketing--he'll cut back office staff instead.
CRITICAL WEAKNESS. Just as important, Ebbers lacks several key strategic assets even after combining the two companies. One critical weakness: MCI WorldCom has no presence in the booming wireless industry. Ebbers has resisted buying a wireless company because the service hasn't been important to business customers. But analysts think the service is too popular to ignore any longer. Moreover, MCI WorldCom lacks a broad local-service offering for residential customers. Even in New York, where the company said it would offer local service, it has taken only minor steps. ''Watch what they do, not what they say,'' says James G. Cullen, president of Bell Atlantic Corp.
Still, Ebbers' high-stakes gamble to take over MCI seems to be paying off. On Feb. 11, MCI WorldCom reported fourth-quarter revenues surged 14%, to $8 billion for the combined companies, while net income hit $428 million after a loss in the year-earlier period. Investors sent the stock soaring 5.5% that day, to $80.44. ''We are continuing to gain confidence in our ability to execute,'' Ebbers told analysts at the time. Indeed, WorldCom outperformed every other major phone company last year, boosting its stock 137%, vs. 60% for Sprint Corp. and 24% for AT&T.
And Ebbers doesn't plan on slowing down. He has positioned MCI WorldCom to capitalize on the fastest-growing segments of the telecom industry--data and international services. With the globe's largest Internet backbone, MCI WorldCom's data business is on a pace to triple, to $23.2 billion, by 2002, estimates Sanford C. Bernstein & Co.'s analyst Tod A. Jacobs. By contrast, AT&T's data revenues will be $13.9 billion, according to Jacobs.
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Ebbers' cowboy ways may change how MCI treats customers. In the past, MCI sought big-name accounts such as NASDAQ for the credibility and the brand-building these projects brought. But under WorldCom, these deals may be evaluated on whether they haul in enough dough. ''Large deals are having to be justified purely on hard numbers,'' says an MCI exec who recently left.
The cultural changes are likely to lead to the departure of some key MCI staffers. Insiders question the future of Timothy F. Price, former MCI president and now CEO of MCI WorldCom's communications business. While Price has been a champion of expensive sales promotions, Ebbers may pull the plug on such goodies, including the MCI Classic PGA tournament. The contrast in styles has led to widespread rumors that Price is on his way out. The company insists nothing is amiss.
As MCI WorldCom hits the rocky post-honeymoon phase, telecom veterans think Ebbers should keep some of the old MCI. ''I hope the culture that emerges will be a balance between the two,'' says former MCI exec Stephen Von Rump. So far though, MCI WorldCom is looking a lot more like WorldCom than like MCI. |
