Bernard Ebbers, the brash, outspoken president and CEO of WorldCom Inc. (WCOM-Nasdaq), abruptly ended his tenure at the company, making way for John Sidgmore to step in and turn the company around.
Ebbers met in the days before his resignation with WorldCom's board of directors and quit under pressure, the casualty of sinking investor confidence, an SEC inquiry, and the company's lowest stock price ever. One aspect of the SEC inquiry is into the terms of $366 million that Ebbers borrowed from WorldCom to cover stock losses, an action Ebbers and WorldCom took so that he wouldn't have to sell hundreds of millions of dollars of company stock.
The question now is whether Sidgmore, previously WorldCom's vice chairman and now president and CEO, has what it takes to shake up the company. Ebbers was more inclined to seek growth through acquisitions. Tech-savvy Sidgmore is more likely to look for revenue growth from the introduction of new services and by emphasizing technical prowess. "We really believe we can turn this company into a growth story again," Sidgmore said during a teleconference with investors. "We have a lot more confidence in the business than anybody else does."
In the next month or two, Sidgmore will develop a plan for restructuring the company. That may involve renegotiating terms of some of the company's debt and juggling some of WorldCom's global assets. Already, WorldCom has reduced its workforce from 80,000 people in December to 71,000 now. And last month, the carrier said it planned to lay off 3,700 employees from its WorldCom Group, which provides data and Internet services to businesses.
"There's somewhat of a sense of relief that Ebbers is out," says David Willis, VP of global networking strategies Meta Group. "The company clearly has a lot of operational problems and replacing one person doesn't change much." But he adds that Sidgmore has a chance to make a difference if he acts decisively.
Shares in the WorldCom Group unit once traded at a peak of $60 but have sunk below $3 a share. Last week, WorldCom had said the unit's 2002 sales are expected to be in the $21 billion to $21.5 billion range, $1 billion less than previous forecasts. Sidgmore reassured investors and customers that in spite of its depressed stock price, WorldCom will continue as a viable business and will not deplete its cash reserves, which totaled $2.3 billion at the end of March. "We don't believe that there's any way under any scenario that we will run out of cash in the foreseeable future," Sidgmore said.
Ebbers' resignation finishes a long and colorful career chapter for the one-time high-school basketball coach. A Canadian, Ebbers began his career as a telecom executive in 1983 in Mississippi when he founded LDDS Communications, a small, regional long-distance reseller. Through more than 70 acquisitions spanning nearly two decades Ebbers built LDDS into WorldCom, which before its recent stumbles was one of the pre-eminent long-distance, data, and Internet service providers in the world.
The company's most notable acquisitions were the purchase of Internet pioneer UUNet Technologies in 1996 and MCI Communications Corp. in 1998. Its success with acquisitions ended when federal regulators blocked WorldCom's proposed $137 billion acquisition of Sprint Corp. in the summer of 2000, after which WorldCom's fortunes began to decline.