WorldCom Who?

In years past, equipment vendors, service providers, and other companies were lining up for photo ops with WorldCom Inc. (Nasdaq: WCOM), one of the largest and most aggressive buyers of data networking gear. Having the company as an account was seen as a major coup, despite the economic slowdown.

WorldCom officials did little to discourage that.

"Our data, Internet, and international businesses continue to perform well in spite of the very difficult economic environment," said former CEO Bernard Ebbers in a company statement last October. "We still expect our growth businesses to gain market share profitably during this period of global economic uncertainty."

But then the sky fell: Today's newswires are rife with companies doing whatever they can to distance themselves from WorldCom (see WorldCom Goes Boom and WorldCom Finger-Pointing Begins ).

"Mosaic Group... today reports that, in response to investors' queries, the current receivable owing to Mosaic from WorldCom's wireless division is less than $2 million," reads one.

Compare this to January, when the Canadian direct marketer was keen on cozying up to the telecom giant: "WorldCom Wireless will be our main U.S.-based wireless partner going forward," said David Graf, president of Mosaic's Performance Solutions division.

In the networking market, one of the equipment providers most exposed to WorldCom is Juniper Networks Inc. (Nasdaq: JNPR), which has counted the company as one of its largest customers. This morning, Juniper moved to downplay this relationship by announcing that its sales to WorldCom are expected to represent less than $7 million of its second-quarter results (see Juniper Unaffected by WorldCom).

Nortel Networks Corp. (NYSE/Toronto: NT), Cisco Systems Inc. (Nasdaq: CSCO), and other equipment vendors have, so far, been silent on their WorldCom exposure.

In the networking market, all of the equipment vendors are still under pressure. Cisco has slipped 0.13 (0.97%) to 13.30; Juniper ticked down 0.081 (1.58%) to 5.049; Lucent lost 0.08 (5.06%) to trade at 1.50; and Nortel fell 0.11 (7.48%) to 1.36.

One hedge-fund manager who has analyzed the situation calculates that Juniper has the largest WorldCom exposure, followed in order by Cisco and Nortel.

"I don't know why Lucent has been hit so hard, because they probably have the least exposure [to WorldCom]," says the hedge-fund manager, asking to remain unnamed. He discloses that his firm has been short-selling "almost all" telecommuinications equipment vendors. "I think it's going to get much worse."

Meanwhile, other large carriers have leapt to point to WorldCom's problems as company-specific, and not an industry phenomenon.

"We are confident that our accounting is complete and accurate, and we welcome any questions related to our accounting practices," says Robert J. Dellinger, Sprint Corp.'s (NYSE: FON) executive vice president and chief financial officer, in a statement today. Later in the statement, however, Sprint acknowledges that its net receivables exposure to WorldCom was about $80 million as of the end of May.

Sprint once tried to merge with WorldCom. "The public benefits are too great to pass up," the company said in a statement issued two years ago on the potential merger.

Qwest Communications International Inc. (NYSE: Q) CEO Richard Notebaert notes, somewhat laconically, "Qwest is a different company and I wouldn't be here if I didn't believe that." (See Qwest: 'We're Different'.)

Even WorldCom's realtor has grabbed the 10-foot pole. Parkway Properties Inc. has outlined its leases with WorldCom or its affiliates, claiming they only represent about 2.4 percent of Parkway's total annualized rental income.

Investment companies, too, are backing away from the Mississippi-based carrier. In a statement, ProAssurance Corp. says it holds $4.7 million worth of WorldCom bonds in its $1.5 billion investment portfolio: "ProAssurance expects this investment in WorldCom will be sold or deemed 'permanently impaired.' "

Wholesale phone company ITXC says WorldCom still owes it some $4.8 million in outstanding billings.

EDS, which in the past has touted its WorldCom ties, has announced that its exposure to "unbilled revenues under the WorldCom agreement is not material."

The Royal Bank of Canada merely notes that it "does not comment on specific accounts or the size of their exposures."

— Phil Harvey, Senior Editor, Light Reading
(R. Scott Raynovich, US Editor, Light Reading, contributed to this report.) Check out Light Reading's July Research Poll on this topic to find out what others think about who's to blame for Worldcom's woes, and whether there are other skeletons in its closet.

kephill 12/4/2012 | 10:11:59 PM
re: WorldCom Who? Nortel has not been silent. They announced no financing deals with WCOM. They are not a creditor.
RJC 12/4/2012 | 10:11:56 PM
re: WorldCom Who? Just for the record, my long distance is with Sprint (NYSE: FON - message board)

let-there-be-light 12/4/2012 | 10:11:56 PM
re: WorldCom Who? My PR department made the following release today (better late than never):

"Semi-notorious LightReading poster "let-there-be-light" has MINIMAL financial relations with WorldCom. Also no evidence of vendor financing found so far."

I just fired my PR department.

BobbyMax 12/4/2012 | 10:11:54 PM
re: WorldCom Who? There are plenty of examples of INCOMPETENCE MANAGEMENT at Lucent, Northern Telecom and AT&T. THere is not a thing that a shareholder can do take any action. There are glaring examples of misuse of power at all these three companies. The qualifications of the CEO and top managers is questionable.

The Board of Firectors of these companies is really so remote that they do not understand much of anything. The wastage and fraud is so prevelent that it is mind boggling. Since Mrs. Pat Ruso took over Lucent, the company has lost over 95% of its value. Yet there salaries, bonuses and stock options are out of control.

The management of Lucent, Nortel and AT&T would enough money to pay for their greed even 30 years from now. The classical example is Xerox. The company is destroyed but its management is paying themselves handsome salaries.

The investors and shareholders lost everything. It willtake 30-40 years before the stock hits $20-$30 range.

Lucent and tock will never hit $10 mark even in 10 years.

Recently some weird reorganization has taken place. Hope someone will provide the necessary details.
lvezz 12/4/2012 | 10:11:53 PM
re: WorldCom Who? Max wrote:
There are glaring examples of misuse of power at all these three companies.


MAX wrote:
The Board of Firectors of these companies is really so remote that they do not understand much of anything.


Max wrote:
Recently some weird reorganization has taken place. Hope someone will provide the necessary details.

hoffmane 12/4/2012 | 10:11:44 PM
re: WorldCom Who? let me get this right!

You are saying that the Board and Executives at Nortel, Lucent et.al. are not incompetent?

Lets look at Nortel

Buys Bay Networks, Was failing before nortel bought it, Nortel did not know and still does not know the Enterprise LAN market (Neither did Bay that is why they were failing).
Buys Alteon, what a good decision 7bn down the tubes, nearly all the alteon people gone, not left, fired!
Screwed up delivery of Optera so that bag logs were up to 18 months!
Am I proving incompetence yet?

Look at Lucent

Bought Prominet (Cajun Switch), proceded to call almost all their enterprise line after a poor quality Layer 2 switch, which could not scale to layer 3, good move. Might have better to call it the Shit Switch, might have caought on better.
Executives feed themselves big bonus's while laying off employees, real F***ing clever there.

Don't try and defend the indefensible, just makes you sound stupid.
mcollett 12/4/2012 | 10:11:40 PM
re: WorldCom Who? Last month Worldcom announced a Metro Ethernet service

(see http://www.lightreading.com/do... )

I also remember an NT announcement that Worldcom was deploying Optera Metro 3500s and Passport 8600s in about 80 cities to support a metro ethernet service.


1) Did Worldcom deploy?
2) If yes, did NT get paid for it (yet?)
3) If no, is the sale part of a current/future NT quarterly forecast, which might need "restatement"?

Pearl 12/4/2012 | 10:11:21 PM
re: WorldCom Who? The thinning has started this week at WorldCon. Advanced technology group all but gone. Deployment lab group still somewhat intact. Ethernet using Nortel merely hype. Ethernet RFP still sort of alive, we'll see... Maybe in 2003 they'll actually be healthy enough again to consider a new service offering (Ethernet), but this is the year of talk and study. Lots like last year...
BobbyMax 12/4/2012 | 10:10:59 PM
re: WorldCom Who? Regardless of the utterances of members of the congrees and the President, there is no relief for the affected people. Nobody would ever go to jail and no laws will ever change that discourage companies from engaging in corrupt activities.

Laws are only made to screw poor and helpless people. The US Government does not believe in fairness and equity. So except for peripheral hearings.nothing would ever happen.

The business malpractices as revealed rtecently are not new. These practices have existed for a long time, but the government did not address these problems. The govern does not care as the whole sceme allows the govrnment to gobble up trillions and trillions dollars of investment. It is just taking someone's money but returns only 10% of the investment.Goodway to grow economy.
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