Feeds

WorldCom ejects Ebbers

Ebbing aways

  • alert
  • submit to reddit

Choosing a cloud hosting partner with confidence

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.

Beginner's guide to SSL certificates

Whitepapers

Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Managing SSL certificates with ease
The lack of operational efficiencies and compliance pitfalls associated with poor SSL certificate management, and how the right SSL certificate management tool can help.
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.