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Thursday, 7 February, 2002, 17:30 GMT
WorldCom denies rumours on its fall
WorldCom logo
US telecom and internet giant WorldCom, the latest firm to be hit by an Enron-related collapse in investor confidence, has announced a huge fall in profits but assured investors that it was not in danger of default or collapse.

The company's chief executive, Bernie Ebbers, said that a bankruptcy or a credit default was "not a concern", as the company had $10bn (7bn) in available cash.

"The veracity of the rumours circulating about WorldCom over the last week has truly been unbelievable. To question WorldCom's viability is utter nonsense," Mr Ebbers said.

The company has seen its share price fall by 52% in the past six weeks, as investors worried about the effects of accounting changes on its balance sheet.

On Thursday, the Mississippi-based company said it may have to write down $15bn-$20bn because of an accounting change.

Modest rally

Mr Ebbers' assurances were enough to spark a rally in WorldCom's shares, which gained almost 16% on Thursday.

The surge came despite a dismal profits announcement from the firm.

WorldCom's earnings in the last three months of 2001 slid almost 35% to $384m, only just meeting the lower end of analysts' expectations.

The company attributed the fall in its profits to stiff competition and reduced technology spending by big corporate clients.

WorldCom's sales were up just 7%, to $5.3bn, in 2001, prompting the company to slash its sales and profits forecast for this year.

Under fire

Investor confidence in WorldCom, once a darling of the telecom sector and still a major player, has been hit hard by the faltering telecom sector and the bankruptcy of its rivals Global Crossing and McLeodUSA.

Around 7,000 employees were fired in attempt to cut costs in 2001.

In the past week, investors have become increasingly concerned about the debt rating and accounting issues.

WorldCom was accused of being slippery with its accounting, especially as regards its mergers and write offs.

The company denies any wrongdoing, but the market is highly sensitive to accounting issues at present, since Enron's collapse.

Rumours have swirled in recent days that the company would have to sell shares to pay off loans, adding pressure on its valuation.

See also:

02 Oct 01 | Business
WorldCom to cut 1,000 jobs
28 Sep 00 | Business
Worldcom tests merger decision
08 Feb 01 | Business
Worldcom profit drops 44%
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