WorldCom Announces It's Cutting 3,700 Jobs

WorldCom says it is cutting its U.S. work force by 3,700 in an effort to better align its costs with its projected growth.

The announcement came Wednesday after sources familiar with the company had said the company 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 is not affected by the layoff order. The company says the layoffs amount to about 4 percent of WorldCom's overall work force.

WorldCom is the nation's second-largest long-distance provider.

Two people familiar with the situation said the layoffs had been planned for last week, but WorldCom president and chief executive Bernie Ebbers postponed the move at the last minute for unspecified reasons.

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.