MCI's $16 Million Man
Oh, to be like Mike.
There's cash as far as the eye can see for
MCI
(MCIP)
CEO Mike Capellas. In addition to his $1.5 million salary and $1.5 million bonus for 2004, the exec landed a $5 million incentive bonus and an $8.2 million stock award, the company said in a federal filing Friday.
MCI cited Capellas' "outstanding accomplishments" last year -- which included steering the company out of bankruptcy and back into the public markets, along with overseeing several rounds of mass firings -- for the big payday.
Indeed, what a year it was.
The former WorldCom emerged from bankruptcy in April, and its shares started trading on Nasdaq for $19 on April 20. By May, with its core business-services sales eroding, the stock had dropped to $13.
But toward the end of the year, as merger speculation heated up and the company moved to lavish a hefty dividend on shareholders, the stock recovered, ending the year at $20.16, up 5%.
Since then, MCI has surged more than 15% on top of last year's gains, as not one but two big telcos have expressed interest in a big merger. For now, agreed suitor
Verizon
(VZ) - Get Report
holds a substantial edge on would-be dealbreaker
Qwest
(Q)
, but talks with Qwest are expected to continue well into midmonth. And if MCI is able to close a deal with either company, Capellas stands to rake in even more dough.
Last year was less happy for many workers who started out on MCI's payroll. The company boasted a staff of 56,600 in January 2004. But by year-end, the staff was down near 40,000, marking a 28% reduction. Qwest has famously promised to spread the pain even more widely, targeting 12,000-15,000 layoffs across a combined company.
Financially, MCI's 2004 tale was just as bleak. The company saw a 15% revenue decline. And even though the company squeezed payroll and administrative expenses by $1.3 billion, it has failed to convince analysts and investors that margins have stopped slipping.
In other words, 2005 -- merger hopes notwithstanding -- is shaping up as a repeat of last year, replete with sales slumps and job cuts.
To be sure, MCI faced some huge challenges when Capellas took over the top job. An MCI representative pointed out that Capellas steered the company out of bankruptcy, secured its tenuous federal contracts and averted a fraud indictment of the company for its role in an $11 billion accounting scandal. The CEO of MCI's corporate predecessor, WorldCom's Bernie Ebbers, is on trial for securities fraud charges that could put him away for as many as 85 years.
Capellas received the maximum bonus he was entitled to for his accomplishment in cleaning up the company and exceeding financial performance targets last year, says the MCI rep.
That said, Capellas clearly earned a good portion of his awards for a memorable acting performance in May, when he told analysts on a conference call that there was an end in sight to the fierce price war that had been bleeding the company's business services results.
"We are starting to see some stability of pricing, particularly on the higher end of the market," Capellas told analysts. But
behind the scenes, MCI was sending letters to AT&T's customers promising 40% savings on their calling plans.
And though MCI climbed an arduous path in 2004, industry observers applaud Capellas mostly for other reasons. Namely, he appears to have come through on the company's main, if unoffical, objective: Selling out. Of course, before he took over MCI, Capellas was best known for selling struggling Compaq to
Hewlett-Packard
(HPQ) - Get Report
, whose failure to make that deal sing recently cost hard-charging Carly Fiorina her job. He raked in on the order of $25 million for 2002's Compaq sale.
No matter what happens at MCI, though, it looks like Capellas will come away richer. According to his employment contract, He's due $9 million if MCI is sold or merges with another company.