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Bankruptcy, Indictments ... And A New Service

WorldCom launches service as it rebuilds business after financial scandal.
As WorldCom forges ahead with new services and network-performance assurances, prosecutors indicted former employees for their alleged roles in the fall of the second-largest U.S. long-distance carrier.

Federal prosecutors in New York last week indicted Scott Sullivan, WorldCom's former CFO, for securities fraud and other financial crimes. The indictment also charges Buford Yates Jr., WorldCom's former director of general accounting, with the same crimes. According to the indictment, the defendants manipulated WorldCom's books to inflate the company's net earnings by about $5 billion between October 2000 and April 2002.

WorldCom isn't letting the indictments or its bankruptcy filing stymie its progress. The carrier recently launched its Managed Firewall offering for dedicated Internet, remote access, virtual private network, and Internet co-location services. The service provides a portal to manage network-security parameters, modify security settings, track daily usage, and file or track trouble reports. Starting at $1,400 a month, the service is available for U.S.-based companies and their global networks.

Scott Sullivan -- Photo by Matt Campbell/AFP

Former CFO Sullivan (center, with FBI agents) is accused of securities fraud and other financial crimes.
Because of its vast global network, "WorldCom is in a better position to deliver on the enhanced services concept than most other carriers," says Michael Suby, senior research analyst at Stratecast Partners. But those careful enough to consider security are unlikely to overlook WorldCom's precarious financial situation, he says.

WorldCom's financial woes and drastically reduced capital budget haven't harmed network performance, says Vinton Cerf, WorldCom's senior VP of Internet architecture and technology. "We aren't seeing any degradation in service," he says, adding that WorldCom was careful not to lay off people whose absence would cause network problems. What's more, during the last six months, the volume of traffic on the carrier's UUnet Internet backbone has been growing at only 40% a year, down from 70% to 80% during recent years.

Photo of Scott Sullivan by Matt Campbell/AFP