January 09, 2001, 11:39 AM — WorldCom Inc. announced major structural changes in the company this morning that involve creating two tracking stocks that would represent the two sectors of the company's business.
Instead of laying out plans to break up the corporation into four separate companies, as AT&T Corp. did last week, WorldCom officials said its board of directors had elected to retain the company name and to create two tracking stocks -- one for its big business services and another for services to smaller businesses and consumers.
The Clinton, Miss.-based company also announced its performance expectations for the fourth quarter of 2000 and for 2001.
Upon shareholder and regulatory approval, one tracking stock, WorldCom, would reflect the performance of the company's data and Internet-related business and would also track local and long-distance voice services sold to businesses.
The other tracking stock, MCI WorldCom, would represent performance of WorldCom's small business and consumer services, including wholesale long-distance voice and Internet dial-up.
The restructuring is designed to take into account the fact that the business data and consumer markets have different characteristics, and to maximize the valuation of each business on Wall Street. The data and business services are a high-growth area for WorldCom, while the consumer services are slower-growing but still very lucrative. By separating them as individual tracking stocks, WorldCom hopes to avoid the situation where the performance of one business inhibits the other.
Bernard Ebbers, WorldCom president and CEO said, "Realigning WorldCom's structure in this way will enable the respective businesses to achieve greater management and resource focus to execute business strategies that work most effectively for each."
WorldCom officials confirmed that Ebbers would remain the corporation's president and CEO and that Scott Sullivan will continue in his position as chief financial officer. However, they said, a new management structure would be named in a few weeks for operations tracked by the MCI stock and that the group would report to Ebbers.
Under the arrangement, shareholders of WorldCom would get one share of MCI stock for every 25 shares of WorldCom common stock, the company said. WorldCom officials said this procedure would apply to shareholders who held WorldCom stock prior to the yet-to-be-determined distribution date of the tracking stock.