Embattled WorldCom Inc. said it will exit the wireless resale business amid rumors it will also lay off 20 percent of its workforce.
Recently installed WorldCom CEO and President John Sidgmore announced yesterday that the Clinton, Miss.-based company plans to get out of the unprofitable wireless resale business. Several carriers that operate their own wireless networks have expressed interest in the business, with nearly $1 billion in revenue and 2 million customers, he said in a statement.
In recent days, three industry analysts said they had heard that WorldCom will also lay off about 16,000 of its 80,000 workers, but a company representative couldn't confirm those job cuts this morning.
Sidgmore did say yesterday that some of the 2,200 wireless jobs at WorldCom will be eliminated during the months-long process of finding a buyer.
"WorldCom has been in deep yogurt, so the sale of wireless resale and the layoffs make sense," said Craig Mathias, a wireless analyst at Farpoint Group in Ashland, Mass.
Sprint PCS Group in Overland Park, Kan., provides the wireless infrastructure for most WorldCom wireless customers and could be a potential buyer of the WorldCom business, Mathias said. Other analysts said Verizon Wireless Inc. in Bedminster, N.J., is another potential buyer.
WorldCom, the No. 2 long-distance carrier in the U.S., has seen a series of setbacks in recent weeks. It recently cut its revenue forecast for 2002 by $1 billion and accepted the resignation of its founder and former CEO Bernie Ebbers, who primarily built the company through a string of acquisitions. The Securities and Exchange Commission is investigating WorldCom accounting practices as well as a loan the WorldCom board arranged with Ebbers.
Mathias said WorldCom has been battered by investors lately because it grew quickly through acquisitions, but the economy turned down and disrupted cashflow for WorldCom and all the carriers.
"The guys that grow slow are considered boring but usually win in the long run," he said.
Tim Scannell, an analyst at Shoreline Research in Quincy, Mass., said the wireless business in general has been "bleak" except for strong interest in wireless local-area network products such as Wi-Fi. It's no wonder that WorldCom would find it hard to make a profit in wireless resale, especially since it can't afford to offer pricing less than that offered by the same carriers selling extra capacity on their networks to WorldCom, he added.