With Profits Up, WorldCom Eyes Tracking Stock

SAN FRANCISCO (07/27/2000) - WorldCom Inc. Thursday reported healthy financial results for its second fiscal quarter, helped along by a sizeable increase in demand for its data, Internet and international services. The company also announced that it may create a separate tracking stock for its voice telephony business.

Excluding unusual items, net income for the quarter ended June 30 increased 54 percent to US$1.3 billion, or 46 cents per common share, from $865 million, or 31 cents a share, a year ago. The per-share earnings matched the expectations of 18 brokers polled by First Call/Thomson Financial.

The results exclude a one-time charge of $55 million after taxes related to WorldCom's aborted merger with U.S. telecommunications provider Sprint Corp.

After merger-related charges, reported net income was 44 cents per share, WorldCom said.

Total revenue grew 14 percent to $10.2 billion, the company said. Revenue from data, Internet and international operations grew to $4.9 billion, up 30 percent from the year ago quarter, and now account for 48 percent of WorldCom's total revenue. Voice revenue, meanwhile, reached $2.75 billion, up from $2.65 billion a year ago, WorldCom said.

The company is investigating opportunities for spinning off portions of its switched voice operations into separate companies or separate tracking stocks, Bernard Ebbers, WorldCom's president and chief executive officer, said in the statement.

"This would allow more efficient management of the voice business while enhancing WorldCom's effectiveness in targeting commercial customers. Revenues from commercial customers grew 20 percent year-over-year this quarter, while wholesale and consumer revenues grew 1 percent," Ebbers said in the statement.

WorldCom's shares on the Nasdaq stock market fell almost 12 percent in midday trading, to $39.56.

The company said it swallowed one-time charges of $55 million after tax in connection with its failed merger with Sprint, which was called off earlier this month after regulators in both the U.S. and Europe objected to the deal on the grounds that it would reduce competition and harm customers. The costs included regulatory, legal, accounting and other costs.

Demand for Internet services was particularly high during the quarter, as businesses increasingly turned to the Net to improve business functions.

Internet revenues increased 40 percent from the year-ago quarter, fueled by demand for higher bandwidth dedicated connections and value-added services, WorldCom said.

Domestic commercial data revenues excluding wholesale grew $442 million, or 30 percent, also reflecting the increased use of the Internet by businesses. Local "Voice Grade Equivalents," which measure the capacity of local private line data circuits, increased 98 percent in the second quarter, the company said.

Revenue originating outside of the U.S. increased by 31 percent to $1.4 billion, driven by strong sales in Europe, as well as increasing revenue in the Asia-Pacific and Latin America regions.

WorldCom, in Jackson, Mississippi, can be reached at +1-601-360-8600 or via the Web at http://www.wcom.com/.

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