Pricing pressures and stiff competition hurt net income for WorldCom Inc., the company said in its earnings announcement Thursday for the second quarter. The company reported lower net income for its data services division than in the same quarter of last year, and a loss for its long distance business compared to profits last year.
In June, WorldCom issued two tracking stocks in place of its previous stock, one to mirror the performance of its high-growth data and Internet services and another to pace its consumer long-distance services. Taken together, the two divisions had consolidated revenue of US$8.9 billion and net income, after goodwill amortization, of $623 million.
WorldCom Inc.'s WorldCom Group data and services division reported net income excluding one-time items of $574 million -- or $0.20 per share -- in the second quarter, compared with $771 million in earnings -- or $0.26 a share -- in the second quarter of 2000. Growth in international services, data and Internet services boosted WorldCom Group's revenues by 12.1 percent, to $5.4 billion.
WorldCom's MCI Group consumer long distance division reported net losses of $29 million, or $0.25 per share, compared with a profit of $541 million, or $4.75 a share, a year earlier. Increasing competition drove down revenues for the MCI Group to $3.5 billion from $4.2 billion.
Wall Street analysts polled by Thomson Financial/First Call expected the WorldCom Group to post earnings of $0.20 a share, but had no prediction for the MCI Group, which was spun off as a separate tracking stock in June.
WorldCom Inc. reduced its cash-earnings guidance for 2001 earlier in July, citing restructuring plans for its investment in Brazilian long-distance telephone company Embratel Participacoes SA and its purchase of Intermedia Communications. The company said it would account for Embratel separately, and expected lower equity results from the Brazilian long-distance carrier. WorldCom owns 19 percent of Embratel.
Company executives touted improvement in the WorldCom groups margins in EBITDA -- or earnings before interest, taxes, depreciation and amortization -- along with improved cash flow, in a conference call Web cast on Thursday.
Visibility -- being able to tell what will happen economically in the future -- remains a problem, said Bernard Ebbers, WorldCom Inc.'s president and chief executive officer. "Obviously, WorldCom is being affected by the economic slowdown like everyone else, and we can't tell with certainty when the economic outlook will improve," he said. "We continue to deliver growth that will allow us to achieve our revenue growth target ... although judging by our stock price it seems like the only people who believe we can do it are in this room with me here today."
The MCI Group is expected to have declining but stabilizing sequential revenues, said Scott Sullivan, chief financial officer for WorldCom Inc., attributing about half of the declining revenue to "right-sizing" and discontinued operations.
WorldCom (WCOM) stock closed at $13.35 on the Nasdaq exchange Wednesday, near its 52-week low, about flat for the year and down 70 percent from its $46.00 high last year. It had climbed to $14.10, up $0.75 or 5.62 percent, in late morning trading Thursday. The MCI Group (MCIT) closed at $15.06 on the Nasdaq exchange Wednesday, also near its $15.00 low and down about 11 percent from its June launch price. The MCI Group's stock had reached $15.16, up $0.10 or 0.66 percent, in late morning trading Thursday.