WorldCom group, a subsidiary of the global communications firm WorldCom Inc., confirmed suspicions late Wednesday that it would cut staff, but the company would not say if the announcement will affect its Canadian workers.
“I don’t think we can comment beyond the statement we put out today,” said Julie Moore, WorldCom’s spokesperson in Clinton, Miss.
WorldCom said it would cut 3,700 of its “U.S.-based” staff in that statement. The layoffs represent six per cent of WorldCom group’s workforce and four per cent of WorldCom’s overall workforce.
The move was expected. Rumours of reductions began after WorldCom group’s Q4 2001 numbers were released in February, when the firm said it “expects mid single-digit percentage full-year 2002 revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) growth.”
Mark Quigley, a Kanata, Ont.-based telecom analyst with the Yankee Group in Canada, said WorldCom is not alone in its current woes.
“The telecom industry as a whole is under a certain amount of scrutiny and malaise. The economy is not going as well as it was. It’s not only WorldCom. AT&T has seen the same kinds of worries in terms of its valuations, as has Sprint. BCE is getting hammered – it’s across the board.”
He added WorldCom gets much of its revenue from long distance telephone charges – a business that, although once lucrative, “has been in fairly steady decline over the past few years.” Competition has eroded previous pots of gold.
This year has been rough on WorldCom. In March the U.S. Securities Exchange Commission (SEC) requested a review of the companies books, including details about “disputed customer bills and sales commissions ” and “WorldCom’s accounting policies for goodwill and implementation of FAS 142” (a rule by the Financial Accounting Standards Board that changes the way companies report goodwill).
The firm said in its 2001 Q4 earnings statement that it had as much as US$10 million wrapped up in receivables from Global Crossing, a communication service provider that filed for bankruptcy in January. However, WorldCom said, “We do not anticipate any material negative operational impact from the bankruptcy proceeding or its outcome.” WorldCom was also waiting on US$1.5 million from Enron Corp., the imploded energy firm.
Joe Greene, an Ottawa-based analyst with IDC Canada, said WorldCom’s layoffs come as no surprise. “I think a lot of these companies got into trouble by expanding too quickly during the heyday of the Internet. Now there’s way too much infrastructure out there and not enough customers…They’ve got a heavy debt, a lot of these companies, and they’re really feeling the pinch.”
It’s not the end of the world for most firms like WorldCom, he added. “There will be a point when it will start to rebound…when the infrastructure is being used and they can justify spending to build more.”
But according to Brownlee Thomas, a Giga Information Group analyst in Montreal, the situation will likely get worse before the dark clouds part. She said word on the street is WorldCom will layoff 30 per cent of its global workforce before all is said and done.
WorldCom is online at www.worldcom.com
The Yankee Group in Canada is at www.yankeegroupcanada.com
IDC Canada can be found at www.idc.ca
Giga Information Group is online at www.gigaweb.com