Layoffs At WorldCom
WorldCom Inc., the No. 2 long-distance telephone and data services company in the U.S., said Wednesday it was cutting its U.S.-based work force by 3,700 to better align costs with projected revenue growth.
The announcement came after company sources said WorldCom could send home as many as 7,500 workers, or 10 percent of its global work force.
WorldCom said in a brief statement that its MCI group was not affected by the layoff, which it said amounted to about 4 percent of WorldCom Inc.'s overall work force.
The reduction is being taken to "better align its costs with its projected 2002 revenue guidance of mid-single digit growth-guidance given in February," the company said.
The layoffs follow other cost-cutting moves at WorldCom, ranging from halting salary increases and stock option grants for some workers, to eliminating free coffee at its offices.
The company has been dogged by concerns over its high debt levels, questions about its accounting methods and loans it made to Chief Executive Officer Bernie Ebbers, issues that have drawn the attention of federal securities regulators.
In midmorning trading on the Nasdaq Stock Market, WorldCom Group shares were selling for $6.59, down 19 cents.
The shares, battered in recent months, traded as low as $5.93 in February after peaking at $64.50 on June 21, 1999.
Analyst Ramkrishna Kasargod with Morgan Keegan & Co. in Memphis said WorldCom, like others in the telecom industry, is responding to lingering sluggishness in the sector.
He said investors continue to have concerns about over-capacity and profitability.
In WorldCom's case, worries also include an ongoing Securities and Exchange Commission investigation and some $24 billion in debt, Kasargod said.
"When you look at all those concerns and the fact the sector is under pricing pressure, I suppose it would make sense to see companies try to reduce costs," he said. "It's the prudent thing to do."
WorldCom's last major job reduction came a little more than a year ago when the company laid off about 6,000 U.S. employees.
Lehman Bros. analyst Blake Bath on Wednesday downgraded WorldCom shares to "market perform" from "strong buy" and predicted the company would announce significant job and capital expenditure cuts in the coming weeks.
Bath also lowered his revenue growth forecasts for WorldCom over the next few years based on tougher-than-anticipated demand and pricing.
The company said last month the SEC had requested documents regarding loans and financial practices dating to 2000.
The inquiry focuses on disputed customer bills and sales commissions, loans by WorldCom to officers or directors, customer service contracts and organizational charts and personnel records for former employees.