Capellas Sets 100-Day Strategy

Bankrupt telecom giant WorldCom Inc. (OTC: WCOEQ) will file a restructuring plan in 100 days, CEO Michael Capellas said today (see WorldCom Unveils 100-Day Plan). In the meantime, the carrier will focus on boosting corporate sales under a newly appointed management team.

Capellas, who joined WorldCom from Hewlett-Packard Co. (NYSE: HPQ) in December (see Michael D. Capellas), told the company’s 60,000 employees that WorldCom needs to cut costs, increase credibility, and launch a series of new products and services in the period leading up to the planned filing of its restructuring plan on April 17.

“In 100 days, we’re going to determine our future,” Capellas said. “It’s time to take the fight to the streets… We are going to win… In 100 days we will celebrate.”

Capellas said WorldCom’s main areas of focus over the coming months will include:

  • Aggressively targeting the small and medium-sized business (SMB) market
  • Attempting to gain new customers for the carrier's Neighborhood local and long-distance packages, as well as for pure long-distance services.
  • Improving credibility through an enhanced code of ethics
  • Cutting costs
  • Selling new products and services
  • Focusing on technologies like voice over IP, IP VPNs, and converged voice/data networks

The SMB market will be the main focus of WorldCom’s efforts over coming months, Capellas said, pointing out that in WorldCom’s addressable space, that market is worth $25 billion. “This should be our heritage. We need to go get it back… This is a market where we really need to put the pedal to the metal.”

Some analysts, though, question WorldCom’s chances of competing in the lucrative SMB market, where the company faces increased competition from regional Bells. Now that the Bells can sell long-distance services in most of the states, competitive carriers like WorldCom are no longer the only ones that offer attractive service bundles of local and long distance (see RBOCs Get Long Distance Go-Ahead).

One source says WorldCom's designs on the "small" part of the SMB market are doomed. “They’re going to try to defend [the small business market] but it’s fruitless,” says Guzman & Company analyst Patrick Comack, pointing out that the RBOCs are taking large market share with small business customers. However, he says, the medium-sized business market is protectable, and he notes that “[Capellas] didn’t show much concern about [WorldCom’s] larger customers. That should be comforting to investors.”

WorldCom’s planned push into the SMB market has at least one observer speculating that the carrier could be planning to abandon the consumer market altogether. “The consumer unit at WorldCom is history,” says Phil Jacobson, an analyst with Network Conceptions LLC. “It looks like they may get rid of their voice-oriented services.”

The fact that Capellas also said today that WorldCom will be strenuously going after consumer customers in the next 100 days doesn’t hurt this theory, Jacobson claims. He says WorldCom is probably trying to raise the value of its consumer business as much as possible, in addition to giving a kick to its competitors, before announcing that it’s for sale. “They’re trying to create as much value, and as much pain, for the RBOCs as possible,” he maintains.

Capellas's drive for new customers, wherever they come from, seems key to the carrier's future. He said WorldCom will try to bag 1 million more customers for its local and long-distance Neighborhood package, as well as 2.5 million more long-distance sales before filing its plan.

There could be a regulatory explanation for WorldCom’s aggressive wooing of customers (see Will Powell Pull the Plug?). At a time when it appears that the FCC may decide to dramatically reduce the access competitive carriers have to the unbundled network element platform (UNE-P), CLECs should try to grab as many UNE-P customers as possible, says Farooq Hussain, also with Network Conceptions: “I would say it’s open season." CLECs, he notes, won't be forced to give customers back if UNE-P is abandoned.

In addition to attempts to gain new ground with customers, Capellas said it's imperative for WorldCom to regain credibility with investors. Last July, WorldCom filed for the world’s largest bankruptcy and saw its reputation crumble amid a $9 billion-plus accounting scandal.

“I know we need to rebuild trust,” he said, admitting that some people will be asked to leave the company following its implementation of a new "zero-tolerance" ethics policy. “In everything we do, we have to promote accountability."

WorldCom also unveiled a new management team:
  • Cindy K. Andreotti, President, Business Markets
  • Seth Blumenfeld, President, WorldCom International
  • Fred Briggs, President, Operations and Technology
  • Daniel Casaccia, Executive VP, Human Resources
  • Jonathan Crane, Executive VP, Strategy and Marketing
  • Wayne Huyard, President, MCI Mass Markets
  • Michael Salsbury, Executive VP and General Counsel
  • Grace Chen Trent, Chief of Staff.

In addition, Victoria Harker will act as CFO until someone can be found to take on the position permanently, Capellas said.

— Eugénie Larson, Reporter, Light Reading
BobbyMax 12/5/2012 | 12:52:09 AM
re: Capellas Sets 100-Day Strategy Does dr. Capellas have any experience in the telecom business? Has he a team of advisors? Who are these guys? If Dr. Capella has a group of advisors that tells him what to say and what to do -- then WorldCom will not be able to salvage itself. If one or more of the proposed items do not work -- Will Capella go back his adsvisors and propose something else. This process will take forever.

I feel that someone with telwecom background would have better served WorldCom at this point in time. It also clearly tells that whether background or not,anyone with the right connection can occupy any position.Very sad situation indeed.
nthornberry 12/5/2012 | 12:52:08 AM
re: Capellas Sets 100-Day Strategy Given the showing of Verizon, SBC and Bell South with integrated services targeted at the SMB market, Patrick Comack's comments that WCOM is going to have a hard time gaining market share are off the mark. Unless CLECs and the IXCs are prevented from competing for Local Access as a consequence of a possible outcome of the pending FCC Triennial Review, it is already clear that competitive carriers are making far more substantial gains in the SMB market for integrated services than the RBOCs. In WorldCom's case, it has had for several months now an award winning integrated services offering [WorldCom Connection] against which the RBOCs do not have a competing offering nor do they have national coverage etc. Also, to imply that RBOC entry into Long Distance gives them the advantage over service offering such as those WCOM has, is I believe an error of judgement.

More interesting perhaps is to fathom out how WorldCom manages to execute a dynamic re-positioning and re-structuring of the company with a team comprised of the same folks who helped 'integrate' WorldCom and the then much larger MCI. While the announcement of the Cappelas management team is new, the names are close to tombstones in MCI's history and perhaps more importantly have been there through the entire Ebbers reign and in very senior positions at that. Only one team member, Grace Chen Trent, Chief of Staff has come from HP. A quick look at the rest:

Cindy K. Andreotti, President, Business Markets (former President MCI National Accounts)
Seth Blumenfeld, President, WorldCom International (fromer President MCI International)
Fred Briggs, President, Operations and Technology (former MCI EVP/Chief Engineer)
Daniel Casaccia, Executive VP, Human Resources (WCOM)
Jonathan Crane, Executive VP, Strategy and Marketing (Sidgemore's hire back - former WCOM/UUNET)
Wayne Huyard, President, MCI Mass Markets (MCI)
Michael Salsbury, Executive VP and General Counsel (MCI)

What a surprise for all of us when the company announce's a name change to MCI ! More importantly what evidence is there that this team can execute a strategy that was beyond MCI's original management team to begin with and whose eventually acquisition by WorldCom -a consequence of a botched deal with BT with Jack Grubman in the mikddle of it - was in significant part a failure of that team to position the company for the future.
fiber_to_toilet 12/5/2012 | 12:52:07 AM
re: Capellas Sets 100-Day Strategy Capellas doesnt know wheat from chaff in telecom markets. He claims a 100 day turn around for WC but I predict he will warm his chair in the office for the next 100 days. He will quit gracefully and go back to selling PCs. He might even join e-Machines and help them save a buck or 2

By the way, HP-CPQ merger is a joke.
aaargh 12/5/2012 | 12:52:03 AM
By Jeff Caruso

New WorldCom CEO and Master of Understatement Michael Capellas
acknowledged to employees yesterday that "bad things have
happened to us." To recover from the "bad things" - which in
large part can be attributed to the company's own shady
accounting practices - he recommended that WorldCom employees
both approach their jobs with an "outrageous, outrageous sense
of urgency" and "hold hands and sing 'Kumbaya, My Lord,'
together." If nothing else, the outrageously urgent version of
the folk song should be... interesting. See what other tricks
Capellas has up his sleeve in this report on his recent speech.

Capellas outlines WorldCom's next 100 days
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