3,700 job cuts at WorldCom

By

Posted 7:39AM on Thursday, April 4, 2002

JACKSON, Miss. - WorldCom Inc. is cutting 3,700 jobs in the United States to better align costs with projected revenue this year. The cuts, announced Wednesday, were limited to the company's WorldCom Group, which includes the high-growth data, Internet and international businesses. They amount to 6 percent of WorldCom Group's employment and 4 percent of the company's 75,000-member global work force. WorldCom also is the nation's second-largest long-distance provider, which it operates through its MCI Group. The Clinton-based company said the job cuts were spread throughout offices across the country. Company sources earlier had said as many as 7,500 people could be laid off. The cuts had been planned for last week, but WorldCom president and chief executive Bernie Ebbers postponed the move at the last minute for unspecified reasons, the sources said. Late Wednesday morning, several employees left the company's Clinton headquarters with their belongings packed in boxes. In afternoon trading on the Nasdaq Stock Market, WorldCom Group shares fell 12 cents to $6.66. The shares, battered in recent months, traded as low as $5.93 in February after peaking at $64.50 on June 21, 1999. MCI Group shares fell 14 cents to $5.45, also on Nasdaq. Analyst Ramkrishna Kasargod with Morgan Keegan & Co. in Memphis said WorldCom, like others in the telecom industry, is responding to lingering sluggishness in the sector. He said investors continue to have concerns about overcapacity and profitability. WorldCom's worries also include some $24 billion in debt and an ongoing Securities and Exchange Commission investigation into its accounting as well as loans made to executives. In early February, when WorldCom reported fourth-quarter earnings, it significantly reduced its 2002 revenue-growth and profit expectations for WorldCom Group. "When you look at all those concerns and the fact the sector is under pricing pressure, I suppose it would make sense to see companies try to reduce costs," Kasargod said. "It's the prudent thing to do." WorldCom's last major job reduction came a little more than a year ago when the company laid off about 6,000 U.S. employees. Lehman Bros. analyst Blake Bath on Wednesday lowered his revenue growth forecasts based on tougher-than-anticipated demand and pricing. He also predicted the company would announce significant capital expenditure cuts in coming weeks. The company said last month the SEC had requested documents regarding loans and financial practices dating to 2000. The inquiry focuses on disputed customer bills and sales commissions, loans by WorldCom to officers or directors, customer service contracts and organizational charts and personnel records for former employees. In a report, Bath said the SEC's 24-point inquiry "is not going away anytime soon and will likely create ongoing overhang on the stock."