Feeds

WorldCom ejects Ebbers

Ebbing aways

  • alert
  • submit to reddit

High performance access to file storage

ComputerWire: IT Industry Intelligence

Debt-ridden carrier WorldCom Inc has bowed to the inevitable and fired its CEO Bernie Ebbers following months of turmoil during which his position became untenable.

Ebbers founded the company and took it on a spending spree that saw its market capitalization rise to $180bn, but the debt he loaded it with to fund its purchases has crippled the company and brought its value down to just $9bn.

The Clinton, Mississippi-based company is currently the subject of an inquiry by the SEC into its accounting procedures, and it revealed earlier this year that Ebbers had borrowed $375m from the company - at a very favorable rate of interest and with no due date - to pay off personal investment losses.

Ebbers' acquisitions hid the fact that the company was consistently failing to produce the earnings necessary to fund the ambitious expansion plans. When regulators on both sides of the Atlantic blocked the $130bn acquisition of Sprint Corp, it signaled the beginning of the end for Ebbers' strategy.

His only other purchase of note after that was the disastrous acquisition of Digex for $6bn in September 2000. By the time the deal finally closed in February 2001, the writing was on the wall for the web-hosting business, but WorldCom continued to throw money at it, and only weeks ago announced that it would spend another $300m to prop it up.

When Ebbers' currency of choice - stock - descended in value to make it almost worthless in terms of its purchase power, more attention was paid to his execution and integration strategy. As the repayments of the amassed debts, which now total $29bn, started to loom, it became apparent that the purchases made could not deliver the necessary growth to pay them off.

Ebbers' position was considerably weakened last week when he admitted that the company was considering selling up to $2bn of assets in a humiliating strategic U-turn from its acquisitive past.

The firing of Ebbers also calls into question the position of CFO Scott Sullivan, who has been closely allied to Ebbers throughout his deal-making. The two created a highly centralized power structure and were known on Wall Street as "The Scott and Bernie Show".

John Sidgmore, who was previously vice chairman, has replaced Ebbers as president and CEO. He is left with a tough job of straightening out the mess WorldCom is in. It needs to find a buyer, but with $29bn debt suffocating its operations, no one will touch it as it stands. A total restructuring through Chapter 11 looks likely sometime next year when its debt maturities kick in.

© ComputerWire. All rights reserved.

High performance access to file storage

More from The Register

next story
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
HP ArcSight ESM solution helps Finansbank
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.