WorldCom Tops Earnings Report With Restructuring News



Amid an earnings report that met analyst expectations, WorldCom CEO Bernie Ebbers confirmed long-standing rumors that the telco plans to remake itself as a company with two distinct operations, one focused on voice services and the other on higher-growth areas such as data and the Internet. WorldCom will detail the strategy Nov. 1. AT&T this week revealed its plans to split into four companies.

Cahners In-Stat Group analyst Mike Lowe says WorldCom's decision likely is an effort to appease investors with disparate appetites. "You've got two pretty different markets here," Lowe says. For instance, if WorldCom were to create a tracking stock for its voice services, it would give risk-averse investors a way to distance themselves from the volatility of its data, Internet, and international operations. Those activities grew 23%, 51%, and 42%, respectively, during the recent quarter.

Giga Information Group analyst Lisa Pierce says she doesn't think WorldCom will spin off its consumer services because that would leave the company with network assets that sit idle after business hours. "That's the problem with trying to break apart a fixed asset that has multiple uses," she says, adding that she favors a tracking-stock scheme.

Word of the restructuring overshadowed news of a successful quarter for WorldCom. For its third quarter, ended Sept. 30, the company reported a profit of $1.36 billion, or 47 cents per diluted share, on revenue of $10 billion, compared with a profit of $1.1 billion, 37 cents, on revenue of $9 billion for the same quarter last year. The current per-share figure doesn't reflect a one-time charge of $405 million from accounts no longer seen as collectible.

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