Jun, 2001 : WorldCom Shareholders Expected to OK Plan

📅 June 7, 2001 - Communications giant WorldCom (worldcom.com) should have no trouble convincing shareholders to support its new direction, say analysts. They say the company should easily win shareholder approval on Thursday for its plan to separate its stagnating long distance business from its growing data and Internet operations.

WorldCom's plan is designed to shield the valuable data business from the competition and price wars that have pulled down long distance prices and eroded profit margins.
At the company's annual meeting in Clinton, Mississippi on Thursday, its shareholders will vote on the plan to create two tracking stocks. Analysts expect the plan, created in November, to be widely supported.
The WorldCom Group, trading under the symbol WCOM, will indicate the performance of the company's core data, Internet, Web hosting and corporate telephone and international businesses. At the same time, the MCI Group, using the stock symbol MCIT, will reflect the consumer, small business, and wholesale long-distance telephone and dial-up Internet access operations.
WorldCom says it hopes the split will boost value for shareholders and allow Wall Street to gauge each component more accurately.
Analysts say the move is designed to place the company's less profitable long-distance operations under a trading stock, so it can focus on the more profitable data operations, and many of them support the plan.
WorldCom, operator of the world's largest Internet backbone, has watched its share value suffer, falling 56 percent over the past year, with the company consistently under performing Wall Street's expectations.
Shares in long-distance telephone companies have been hurt by heavy competition. falling prices for telephone calls and a shift among consumers from traditional telephone calls to technologies like wireless. WorldCom also cut its growth outlook last year after failing in its attempt to merge with smaller rival Sprint Corp.
WorldCom says it expects 2001 revenues for the WorldCom Group to grow between 12 and 15 percent, with cash earnings of between $1.25 and $1.35 for the year. At the same time, the MCI group will having declining but stabilizing sequential revenues, and cash earnings of between 25 cents and 30 cents a share. The group will generate enough cash flow in 2001 to fund its anticipated dividends and debt.
Despite the restructuring, though, WorldCom will still face the costs involved with operating new growth businesses like Web hosting. But in an effort to support its data center operations, WorldCom plans to acquire Intermedia Communications Inc., which controls Web hosting company Digex Inc. And analysts expect WorldCom to continue pursuing acquisitions of Web hosting and Internet services companies.