WorldCom CEO Bernie Ebbers Resigns - WLOX.com - The News for South Mississippi

WorldCom CEO Bernie Ebbers Resigns

CLINTON, Miss. (AP) - Bernard J. Ebbers, who built WorldCom Inc. into a global telecommunications giant but then saw its fortunes and stock price crumble amid fierce industry competition and questions about the company's finances, has resigned as its chief executive and president.

WorldCom said Tuesday that vice chairman John Sidgmore would succeed Ebbers in both positions. Bert Roberts remains chairman.

Company spokesman Brad Burns said Ebbers and board members met Friday to discuss the company's situation, and those talks continued Saturday. Ebbers resigned Monday.

WorldCom, one of the darlings of Wall Street a few years ago, has seen investors turn against it in recent months over concerns about the company's $28 billion in debt and an ongoing Securities and Exchange Commission investigation into lending and accounting practices.

Its long-distance business, the nation's second largest after AT&T Corp., has also come under pressure from industrywide price discounting. Ebbers, a Canadian who attended Mississippi College in Clinton on a basketball scholarship, built WorldCom from a small long-distance company into a telecommunications force through more than 60 acquisitions in the past 15 years.

The rapid-fire growth was stopped dead in its tracks in 2000 when federal and European regulators blocked WorldCom's proposed $129 billion merger with Sprint Corp., citing competition concerns. Since then, the dealmaking has dwindled and so has WorldCom's earnings growth.

In April, the company said it was eliminating 3,700 jobs in the United States, or about 4.4 percent of its global work force, to better align costs with projected revenue this year.

"Business conditions remain as challenging as ever, but it seems as if Bernie had been sort of a lightning rod in terms of drawing attention,'' said David Burks, an analyst with J.J.B. Hilliard, W.L. Lyons in Louisville, Ky. "Maybe his departure lessens some of the negative publicity surrounding the company.''

Burks said analysts and investors will be eager to hear Sidgmore's plans for the company.

"Things have been spiraling downward so fast,'' he said. "At this point, from a perception standpoint, the company needs something to show that it's not business as usual.''

Sidgmore has served as vice chairman since 1996 and as the company's chief operations officer from December 1996 to September 1998. He previously ran the company's Internet business.

Burns said Sidgmore would work out of the Washington, D.C., area, but the company's headquarters would remain in Clinton, a small college town about 10 miles west of Jackson.

WorldCom stock, which has lost some 80 percent of its value this year, was up 37 cents to $2.72 in midday trading Tuesday on the Nasdaq Stock Market. Those shares track the part of the company that sells data and Internet services to large customers. Those shares traded at a high of $64.50 in June 1999.

Shares of MCI Group, created last year to track long distance and other consumer services, were up 26 cents to $3.70, also on the Nasdaq.

"We are an exceptional company and a global leader with few peers,'' Sidgmore said in a statement. "While our industry has been buffeted by the economic downturn in recent months, WorldCom is well positioned to capitalize on an economic upturn.''

Eight equity analysts downgraded WorldCom shares last week, days after the company slashed its revenue and profit forecasts for 2002. At the same time, bond ratings agencies Moody's Investors Service, Standard & Poor's and Fitch all cut their long-term credit ratings on WorldCom's debt.

Last Thursday, WorldCom's first-quarter earnings report showed profits for the company's core businesses plunged 66 percent as corporate clients reduced spending.

WorldCom relies heavily on large companies that buy its range of telecommunications services. Many of those businesses have scaled back operations because of the weak economy, reducing their need for WorldCom's offerings.

Declining sales have raised questions about whether WorldCom will be able to meet its billions in financial obligations in the next few years.

In March, two WorldCom stockholders sued the company's board over $375 million in loans that the company has made to Ebbers. Ebbers has said he has enough personal assets to cover the loans.

In Tuesday's statement announcing the leadership changes, company officials praised Ebbers for creating one of the largest communications providers in the world.

"Thanks to Bernie, WorldCom is an industry leader with the most valuable customers, assets and employees in the communications industry today,'' Roberts said.

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