WorldCom is separating its healthier business-related operations from its struggling MCI long distance brand and calling card operations.
"Most of the layoffs will likely be in the slow-growth business unit," said Drake Johnstone, an analyst with Davenport & Co. in Richmond, Va. "Those businesses are in a state of decline, and the company is trying to reduce costs and generate cash flow."
WorldCom would follow corporate giants such as Lucent Technologies Inc., AOL Time Warner Inc., Textron Inc., J.C. Penney Co. Inc. and Sara Lee Corp., which announced job cuts this week.
The layoffs are expected to be announced Feb. 8 when WorldCom releases its fourth earnings.
WorldCom spokesman Charlie Sutlive declined to discuss the layoffs, saying the company "does not comment on rumor or speculation, and that's what it is."
In November, WorldCom announced plans to create a new tracking stock to separate its healthy business units from those that have floundered because of increasing competition among long-distance and wireless phone companies.
The new tracking stock, which will pay a dividend, is expected to be distributed to WorldCom shareholders during the first half of 2001. The tracker will be called MCI and trade under the symbol MCIT.
WorldCom, like AT&T and Sprint, has been battered by long-distance price wars and new competition from wireless phones and technology that enable calls to be placed over the Internet.
Analysts said WorldCom is hoping to contain that weakness within the new tracking stock so it won't tarnish the financial performance of the company's more profitable business of transporting data for companies.
WorldCom has been working to cut costs and refocus its business on fast-growth data and Internet services. In November, the company slashed its growth outlook through 2001.
WorldCom previously cut about 2,300 jobs in 1998 to trim expenses after its $40 billion acquisition of MCI Communications Inc.
As the company moves in that direction, it will put less emphasis on its faltering units "so one would expect cutbacks to be made," said Ramkrishna Kasargod, an analyst with Morgan Keegan & Co. Inc. in Memphis, Tenn.
"When one looks at the speculation of job cuts, that's got to be tied to the company's decision to exit what they don't view as profitable for the company," Kasargod said.
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