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WorldCom to Lay Off 3,700 at Internet Unit to Trim Costs

April 04, 2002|From Reuters

WorldCom Inc., the No. 2 U.S. long-distance telephone and data-services company, said Wednesday that it will cut 3,700 jobs at its main data and Internet business, or 4% of its total work force, to trim costs and offset slowing revenue growth.

The Clinton, Miss.-based company, which employs 85,000 people, said it will cut U.S.-based staff at its data unit, WorldCom Group, but will not eliminate any positions at its long-distance telephone unit, MCI Group.

The layoff total is about half the number that had been expected. WorldCom has made several moves to cut costs--ranging from halting salary increases and stock option grants for some workers to eliminating free coffee. It also has shed about 9,000 jobs in the last year.

WorldCom Group shares lost 27 cents, or 4%, to close at $6.51, and MCI Group shares gained 17 cents, or 3%, to close at $5.76, both on Nasdaq.

WorldCom has been dogged in recent months by concerns about its high debt, questions about its accounting methods and loans it made to Chief Executive Bernie Ebbers--issues that have drawn the attention of federal securities regulators.

These woes added to pressures throughout the telecom industry, such as a glut of high-speed data network capacity, slim demand for data-transmission services and restrained spending by business customers in the weak economy.

In February, the company cut its 2002 revenue-growth forecast for the WorldCom Group to 5%, down from an earlier forecast of high-single-digit to low-double-digit growth.

Analysts said the company could cut its capital spending budget by an additional $1 billion. Last month, WorldCom said 2002 capital spending for the data and Internet business could be at the lower end of the range of $5 billion to $5.5 billion.

In addition to cutting jobs Wednesday, WorldCom moved to trim its massive $30-billion debt load. Using its improved cash position, the company said it would redeem $700 million of notes.

The company said its cash pile increased because it reaped about $800 million in proceeds from selling its stake in News Corp., and its operations generate free cash flow.

Analysts said restrained capital spending and cost-cutting moves also helped add to the cash cushion.

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