Ch 2 WorldCom Flashcards
What went wrong at WorldCom?
It was all about money (and power and ego)
What went right at WorldCom?
Committed to doing the right thing
What was learned in the aftermath of WorldCom?
Successful organizations depend upon ethical leadership, values, reinforcement, and ultimately culture
In a nutshell, what were WorldCom’s five phases of growth and transformation?
1) Emergence of LDDS
2) LDDS to WorldCom
3) Expansion into Local Markets and Internet Service
4) Consolidation of Leadership in Local and Long Distance Telecommunications Services
5) The Downturn for Telecom and World Com (“The Perfect Storm”)
What does LDDS stand for?
Long Distance Discount Services
In what year did a group of investors form a small telecommunciations reseller called LDDS, which was licensed to provide long distance service in Mississippi?
1983
In 1984, LDDS’ annual revenues totaled roughly how much?
$1 million
In 1985, who was elected CEO of LDDS?
Bernie Ebbers
True or False.
In 1989, LDDS merged with Advantage Companies, Inc. becoming a bigger private company.
False (became public company)
From 1984 to 1989, LDDS revenues jumped from how much to how much?
$1 million to $116 million
How did LDDS become WorldCom?
- 1992, LDDS merged with ATC
- 1995, LDDS acquires WilTel Network
- April 1995, LDDS changes name to WorldCom, reflecting global presence
After LDDS became WorldCom, what did annual revenues jump to ? What did debts total?
$3.9 billion rev; $3.4 billion debt
True or false.
In 1996, WorldCom acquired MFS to expand into local and internet services. Its annual revenues equalled its debts at $4.8 billion.
True
After what merger did WorldCom establish itself as a leader in local and long distance?
- Merger with MCI
- Annual revenues @ $17.6B
- Debt @ $21.2B
True or false.
Although the specific number varies depending on the source, WorldCom acquired over 60 companies from 1983-2001.
True
In what year did WorldCom’s stock reach an all-time high?
1999 @ $96.76 per share
With whom did WorldCom fail to merge with because the government feared it would put too much market power in the hands of a single company?
Sprint
True or false.
In 1983, LDDS had revenues of less than $1 million. In 2001, WorldCom had annual revenues of $35 billion.
True
Fill in the blanks.
In two decades, LDDS evolved from a ____ phone company to a _____ communications company through a series of more than ____ acquisitions.
- local
- global
- 60
What were the market conditions of the perfect storm in 2000?
- tech boom ends
- recognition of overcapacity in telecom markets and prices for telecom services drop
In the face of a falling stock price in 2000, why did the BOD approve loans to Ebbers totaling over $75 million?
In order to prevent Ebbers from selling stock to pay outstanding debts
(Ebbers had pledged WorldCom stock as collateral for business and personal loans)
On April 30, 2002, who resigned as President, CEO and Director of WorldCom?
Bernie Ebbers
On May 14, 2002, who did WorldCom terminate as its independent auditor?
AA (retains KPMG as its independent auditor)
Who dominated the course of WorldCom’s growth, as well as the decisions of the BOD?
Bernie Ebbers
WorldCom put extraordinary pressure on itself to do what?
Meet analyst expectations (and created an environment in which meeting analyst expectations became more important than accurate financial reporting)
How was WorldCom’s fraud discovered?
It was uncovered by WorldCom’s Internal Audit Department
In general terms, WorldCom overstated its reported net income by doing what?
Capitalizing line costs
On July 21, 2002, WorldCom and substantially all of its US subsidiaries filed voluntary petitions for bankruptcy under Ch. 11 of the US Code, enabling WorldCom to do what four things?
1) Create the greatest possible value for creditors
2) Preserve jobs for employees
3) Continue to deliver top-quality service
4) Regain financial health and focus
How much was WorldCom’s bankruptcy filing?
$103 billion
WorldCom committed to doing the right thing by doing what?
- Turning itself in
How did the tone at the top change at WorldCom?
- From: “Codes of conduct are a colossal waste of time”
- To: “Do the right thing b/c it’s the right thing to do”
