JACKSON - A day after WorldCom Inc. shares rose on news of a new chief executive, they fell again Wednesday as investors turned their attention back to the company's massive debt, analysts said.
WorldCom stock, which has lost more than 80 percent of its value this year, was off 26 cents, or 10.8 percent, to close at $2.21 in trading Wednesday on the Nasdaq Stock Market.
Shares of MCI Group, created last year to track long distance and other consumer services, fell 54 cents, or 14.4 percent, to $3.24, also on the Nasdaq.
John Sidgmore, who replaced WorldCom founder Bernie Ebbers as president and CEO on Tuesday, embarked Wednesday on a one-month to two-month review of the company's assets and on creating a strategy to re-establish growth in the beleaguered telecom.
Analysts say Sidgmore needs to act quickly and offer specifics on how he'll raise cash to slash WorldCom's $28 billion in debt.
Some of the possibilities, according to analysts:
- Eliminating the dividend paid by the MCI tracker stock and rolling that portion of the company back into WorldCom.
- Reducing its capital expenditure budget, which is $4.9 billion this year.
- Selling certain assets such as the company's stake in the Brazilian phone company Embratel.
"The first order of the day is that they have to quell the fears," said analyst Ramkrishna Kasargod with Morgan Keegan & Co. in Memphis.
"It's obvious that words aren't going to make a difference."
A good start would be arranging or extending a credit line with a major bank or releasing positive news about the ongoing Securities and Exchange Commission investigation into lending and accounting practices, Kasargod said.
He cited Houston-based Dynegy Inc. as an example of how good news can lift a company.
Dynegy announced Tuesday it had secured a new $900 million revolving credit line at the same time it reported a $140 million first-quarter loss due primarily to its underperforming telecommunications division.
Still, the energy marketer's shares rose 30 percent Tuesday. They retreated 7 percent Wednesday.
"WorldCom needs something to boost confidence," Kasargod said.
WorldCom, like others in the telecom industry, has seen its value diminish in the past couple of years because of pricing competition and a glut of network capacity.
Debt and the SEC probe aside, WorldCom also has taken a beating because it relies heavily on large customers who buy its Internet and data services. Many of those clients have reduced or eliminated service during the economic slump.
Two weeks ago, WorldCom slashed its revenue and profit forecasts for 2002.
Sidgmore on Tuesday played down concerns of an impending cash crunch.
"We don't believe that there's any way under any scenario that we're going to run out of cash in the foreseeable future," he said.
