replacement for Bernie Ebbers. Judging by his lofty words, he could easily be Rip Van Winkle.
OK, so the new CEO is actually well-regarded UUNet veteran John Sidgmore. But to investors who fear the worst for WorldCom, Sidgmore's promise on a Tuesday conference call to return the company to its fast-growing heyday only stoked fears of further backsliding. As strong a salesman as Sidgmore may be, they say, he isn't the right man for this debt-heavy, cash-squeezed, government-probed telco.
While observers agree that it was Ebbers who steered WorldCom headlong into crisis, they say his efforts to correct the damage should, if anything, be redoubled rather than relaxed. And anyone who has been looking at the telecom industry's sorry numbers in recent weeks knows that growth is going to be a tall order for a company that shrank more than 2% in the latest quarter.
"There are some areas where they will show growth, but the near-term issues don't have anything to do with growth -- not when you have liquidity concerns and a huge debt position," says Robertson Stephens analyst Jim Friedland. "Before you talk about growth you have to talk about stabilization." Friedland has a strong buy on WorldCom; Robertson Stephens has no underwriting ties to the company.
Dancing in the Street
WorldCom dusted off the executive-at-large to take the CEO spot from ousted Bernie Ebbers on Tuesday. In his first conference call with analysts since taking the post, Sidgmore took aim at what he called negative perceptions of the company. He also promised to stoke the idle growth engine that had stalled under Ebbers' recent cost-cutting push. The stock, off more than 80% this year, added 9 cents to $2.44.
Employees in several WorldCom offices -- though notably not at the headquarters in Clinton, Miss. -- report that there was "dancing in the aisles, dancing in the cubes" as the Ebbers era came to an end. But while workers may have cheered, investors retained a few unshakable reservations about the company's prospects. Among the foremost concerns of WorldCom watchers is whether the company can stem the continued decline in its core business and manage its ever-tightening finances.
Sidgmore addressed the survival question that has dogged WorldCom in recent weeks by saying there is "no scenario" in which the company runs out of cash. He also said he would huddle with his top management team and form a new strategy over the next month or two.
But clearly, investors were hoping for more answers on that front. Some observers doubt that anyone could make a difference at WorldCom right now, considering the accelerating deterioration of the industry's cash flow from top to bottom. Meanwhile, others suggest that as qualified as Sidgmore may be, he's a square peg for this job's oddly shaped hole.
"Sidgmore is a builder," says Paul O'Neil, a money manager with Knight Bain Seath & Holbrook who has no WorldCom positions. But considering the murky health of WorldCom and the entire telecom industry, "a builder is no longer required."
Sidgmore works out of New Jersey and says he has no intention of relocating to Mississippi. He came to WorldCom via the UUNet acquisition and has been an industry rubber-chicken circuit regular, repeatedly pitching WorldCom's Internet-centric service proposition.
In addition to trying to rekindle companywide excitement, Sidgmore promised to play an active role in selling services to large accounts. He cites his track record at UUNet, where he landed uber customer
, and later at WorldCom, where he was instrumental in securing a fair share of
To some, the executive looks disquietingly like his predecessor Ebbers, whose acquisitive business stylings fell out of fashion in the telecom bust. According to this line of thinking, Sidgmore's "guru of growth" role seems out of touch with current events.
"What they need is a hardened, seasoned outsider that will take a butcher knife to costs and sell off assets ASAP," says money manager O'Neil. "The longer they wait to sell, the lower the price will go for their assets."
With Sidgmore needing a few weeks to get familiar with the day-to-day issues at WorldCom, employees know their jubilance may be short-lived. But at the very least the change of guard helped lift morale, which has been less than buoyant at the No. 2 long-distance company. In recent months, after all, employees have endured firings, fears of bankruptcy, and the removal of perks -- like bonuses and even office plants and free coffee.
Saying that a WorldCom without Ebbers was a noticeably happier place, one WorldCom employee expressed gratitude for the news, even while admitting that the upheaval at the company might put that employee out of a job. Says the employee, "Even if I get laid off, I still will have had a month."