JACKSON - WorldCom Inc. will have two stocks instead of one this week in a restructuring that will allow the telecommunications giant to focus on its fast-growing data and Internet operations.
The move to create two, separately traded stocks must be OK'd by shareholders at the company's annual meeting in Clinton on Thursday. Observers say approval is a sure thing.
"It's a slam dunk," said Patrick Comack, an analyst with the investment bank Guzman & Co. in Miami. "WorldCom wants to purge itself of MCI. It's been a drag on the company."
WorldCom announced plans in November to separate its struggling voice operations, or the MCI Group, from its high-growth data, Internet and international businesses in the WorldCom Group.
Standard and Poor's said Monday the WorldCom Group will remain in the S&P 500 and S&P Global 100, but the MCI tracking stock will not.
"Clearly, WorldCom stock has been negatively affected in the past year because of the company's long-suffering long-distance business," said David Burks with the brokerage J.J.B. Hilliard, W.L. Lyons in Louisville, Ky.
"Hopefully, the creation of the tracking stock will allow the WorldCom Group the opportunity for greater growth on a longer-term basis," Burks said.
WorldCom already has started reporting separate results for the two groups, and its emphasis on the WorldCom sector was reflected in April's first quarter earnings.
WorldCom Group earned $6.1 billion, an increase of 12 percent from the year-ago period. Results were driven by 22 percent year-over-year revenue growth in data and Internet services and 19 percent growth in international services.
Company officials expect revenue growth of 12 percent to 15 percent for the year in the WorldCom Group.
Meanwhile, the MCI Group had revenue of $3.6 billion in the first quarter, down from $4.2 billion in the same quarter last year.
Overall for the quarter, WorldCom Inc. reported earnings of $610 million, with severance packages and foreign currency fluctuations hitting the company hard.
WorldCom shares were up 30 cents to $18.29 in early afternoon trading Tuesday on the Nasdaq Stock Market. In the past year, shares have traded as high as $50 and as low as $13.50.
WorldCom chairman and chief executive Bernie Ebbers said late last year, after the stock's tumble, that he had let down himself and the company's shareholders.
Comack said Ebbers' obvious goal now is to boost the stock's value. He also said he thinks the company is a takeover target.
"I think various telecom companies have WorldCom on their screen," Comack said. "Bernie is on a mission to recreate shareholder value, and if he and the company can't do it themselves, they'll look at bids. No doubt about it."
Comack said if Ebbers received an offer of $35 a share, "he would be in a tough position because shareholders would be on his back to take it."
In March, Ebbers said WorldCom was for sale, as it has been since day one, but the company was focusing on improving its value, not takeover bids.
Ebbers' comments were in response to a Wall Street Journal article that said he had "expressed interest" in selling the company for the right price - possibly $35 a share.
Ebbers said selling the company for that price would not be the best deal for shareholders, "and I happen to be one of them."
Copyright 2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
