UPDATE - WorldCom will keep operating under Chapter 11

ITworld.com |  Networking

"If you pick the smallest piece out of (the acquisitions), will there be a problem mixing and matching assets? What part of the picture can you remove, and still have it look like a whole picture? WorldCom will be a very different company in a year," Quinn said.

The company is expected to sell its Latin American interests, and its wireless resale business, keeping the Skytel paging system, she said.

Expenses will certainly be reduced by the decision to suspend executive bonuses, which leaves Sidgmore's compensation at "just a salary," he said. Executive compensation for the rest of the year will be determined by judges, he said.

WorldCom also announced the appointment of two new members to its board of directors. Nicholas Katzenbach and Dennis Beresford will have an oversight role over the previously announced internal investigation into the accounting irregularities. Katzenbach was U.S. Attorney General during the Lyndon Johnson administration in 1965 to 1966, and later served as senior vice president of IBM Corp. Beresford is currently a professor at the University of Georgia, and was chairman of the Financial Accounting Standards Board, which is responsible for maintaining the GAAP (generally accepted accounting principles) standard, from 1987 to 1997.

The appointment of the directors "demonstrates our seriousness in getting to the bottom of those problems," said Sidgmore.

KPMG LLP is currently auditing WorldCom's financial records, and the turnaround time for the company will depend on when KPMG can deliver those results, said Sidgmore.

WorldCom was scheduled to report its second quarter results next week, but is now unlikely to do so, said Sidgmore.

WorldCom was valued at around $120 billion at its peak in the summer of 1999. Late last week, WorldCom's market capitalization had fallen to $280 million, the Journal reported. Its stock (WCOME) was trading up $0.04 to $0.13 a share in midday trading on the Nasdaq Monday, with almost 400 million shares exchanged.

While a filing Chapter 11 enables WorldCom to keep its creditors at bay, it does not wipe out the company's other difficulties, which include:

-- the discovery in late June of accounting irregularities totalling an estimated $3.85 billion.

-- a lawsuit brought by the U.S. Securities and Exchange Commission (SEC), related to the accounting irregularities, charging the company with fraud and asking a court to block the destruction of documents by WorldCom.

-- an investigation into the irregularities by the U.S. House of Representatives' Energy and Commerce Committee.

-- a lawsuit which the company has filed against former Chief Financial Officer Scott Sullivan, seeking to recover a US$10 million bonus awarded to Sullivan in 2000.

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