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WorldCom Outlines '100-Day' Recovery

Analysts are upbeat as CEO Michael Capellas names new managers in a plan to steer the firm out of Chapter 11.

January 15, 2003|From Bloomberg News

CLINTON, Miss. — WorldCom Inc. Chief Executive Michael Capellas, outlining a "100-day plan" he promised last month, on Tuesday named new managers to help steer the second-biggest U.S. long-distance company out of bankruptcy protection.

The former Hewlett-Packard Co. president brought in two executives from his previous employer and reorganized existing WorldCom management. In a speech to employees broadcast on the Internet, Capellas named finance executive Victoria Harker acting chief financial officer to replace John Dubel. WorldCom will file a bankruptcy reorganization plan by April 15.

He also acknowledged there were "very few silver bullets" that would quickly solve WorldCom's problems.

Instead, "it's about making things and selling things and talking to customers and doing the basics right," he said. "We will define our future over the next 100 days and we're going to do it with an outrageous, outrageous sense of urgency."

Capellas plans to cut costs, including 10% of overhead and selling, general and administrative expenses. He is seeking to buoy employee morale, retain customers such as Wal-Mart Stores Inc. and lead WorldCom from Chapter 11 intact by midyear. More than $9 billion in accounting misstatements under former CEO Bernard J. Ebbers drove the company into bankruptcy protection in July.

"The one clear goal of having a plan to emerge from bankruptcy after the first 100 days is aggressive," said Jeff Kagan, an independent telecommunications analyst in Atlanta. "This was the first tangible evidence that the worst might be over" for WorldCom.

The Clinton, Miss.-based telephone company posted a loss from continuing operations of $205 million in October, almost double the September loss. Sales were little changed at $2.3 billion. Accounts dating to 1999 will be restated because of the accounting scandal, which has resulted in U.S. securities- fraud charges against former WorldCom finance chief Scott Sullivan.

"They look like they still have a business that's in operational difficulty," Rick Tilton, CEO of Greenacre Asset Advisors, said before Capellas' speech.

To help boost revenue, WorldCom will try to sell more voice and data services on the same network to companies. It also plans to introduce new consumer and business offerings, Capellas said.

Dubel, a principal with restructuring firm AlixPartners, was appointed finance chief in July after Sullivan was fired. Sullivan, accused of orchestrating a multibillion-dollar accounting fraud, has pleaded not guilty.

Six of 10 board members stepped down last month and have yet to be replaced. Ebbers resigned under pressure in April amid investor anger over $400 million he borrowed from the company and declining sales and share prices.

Shares of WorldCom rose 2 cents to 18 cents in over-the-counter trading. The company's bonds traded at 27 cents on the dollar, traders said.

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