New Yankee Group report explores viability of WorldCom

June 27, 2002--In its new Report, "WorldCom: On the Verge of Collapse?," the Yankee Group examines four possible scenarios for the company--continuing to operate, filing for bankruptcy, being acquired, and ceasing operations--and the impact each would have on customers and employees.

Jun 27th, 2002

WorldCom stunned the telecom industry on June 25 with the announcement that it had "inappropriately" booked $3.8 billion of expenses as capital during fiscal year 2001 and the first quarter of 2002. The accounting scandal erupts as newly appointed chief executive officer John Sidgmore labors to restore the confidence of investors, customers, and employees, and develop a strategic plan for the company. Burdened with slower growth, weak financial performance, and scandal, as well as continuing SEC investigations and the resultant loss of confidence, will WorldCom survive?

In its new Report, "WorldCom: On the Verge of Collapse?," the Yankee Group examines four possible scenarios for the company--continuing to operate, filing for bankruptcy, being acquired, and ceasing operations--and the impact each would have on customers and employees. While a Chapter 11 bankruptcy filing is the most likely immediate outcome, the WorldCom that emerges from bankruptcy is likely to be a substantially different company, say analysts.

"WorldCom must act swiftly to uncover the full extent of its financial issues and realistically assess whether it can reasonably overcome its current difficulties," contends Eileen Eastman, vice president of business communications strategies at the Yankee Group. "Bankruptcy would protect the company's assets while this assessment is completed, but this must be done quickly or there will be few customers or employees left when it is done," she adds.

Unlike other telecommunications business failures, WorldCom is a major player in all customer segments and a major infrastructure provider to other carriers. The company's UUNET Internet backbone is arguably the largest Internet network worldwide. If the company is forced to shut down operations, it will not only have serious ramifications for the telecom sector, but will also delay the economic recovery in the technology sector, says the report.

For more information about this report and other research by the Yankee Group (Boston), visit the company's Web site at www.yankeegroup.com.

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