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Tuesday, 30 April, 2002, 12:48 GMT 13:48 UK
WorldCom founder resigns
WorldCom founder and former CEO Bernie Ebbers
Ebbers founded WorldCom and moulded it to his own buccaneering style
Bernie Ebbers, founder and colourful chief executive of US telecoms company WorldCom, has resigned following a collapse in the company's share price, falling sales and investigations into his personal finances.

Mr Ebbers, who is 60, agreed to hand in his resignation on Monday after meeting board members late last week.

Taking over at the top is 51-year-old vice chairman John Sidgmore, formerly the head of the company's internet unit UUNet.

The announcement by the Mississippi-based long-distance carrier, the US number two, gave its shares a badly-needed boost, lifting them 11% to $2.61.

From a high of more than $60 at the height of the telecoms boom in 1999, WorldCom stock slumped to just $2.35 on Monday, a fall of 30% on the day as rumours of problems with the company's debt circulated.

Burden

The problem for WorldCom - and, according to observers, the last straw for directors and big shareholders - was the company's debt.

For 19 years WorldCom has ridden a roller-coaster of breakneck, acquisition-fuelled expansion, which took in a merger with MCI and very nearly one with Sprint, two of the other three main long-distance players in the US.

The growth means that it has gone from being a small-time regional discount operator to having 20 million consumers and thousands of companies on its books.

But indebtedness has ballooned, leaving the company owing $30.2bn.

Last week two credit rating agencies issued a sharp downgrade and a warning of more bad news to come.

In 2003, depending on circumstance, it could need to repay more than $3bn, and the credit rating means the financial markets are unlikely to play ball.

Desperate measures

Earlier in April WorldCom said it would sack 3,700 people of its 80,000-strong workforce in the hope of better balancing its books.

And then last week came a profit warning, cutting sales expectations to $21-21.5bn from $22-22.6bn for 2002. Profits for the first quarter of the year, meanwhile, fell 78% to $130m.

That helped tip the scale, sparking fears that the financial trouble eating at the telecoms sector was set to start engulfing the big names - like WorldCom itself.

Mr Ebbers' buccaneering style has been a concern for creditors for some time, who welcomed the chance to replace him with someone a little more focused on day to day management and less on dealmaking.

The man on the spot

WorldCom's corporate problems are not the only reason for Mr Ebbers' sudden departure - although its ties with accountants Arthur Andersen are raising eyebrows and causing a reassessment of its figures.

His own finances are in pretty poor shape too.

An investigation is under way at the mighty Securities and Exchange Commission into a $366.5m loan made to Mr Ebbers by WorldCom.

He had already borrowed from Bank of America to buy WorldCom shares, and when they tanked he paid the bank back with money loaned by his company.

 WATCH/LISTEN
 ON THIS STORY
Rebecca Bloomenstein, Wall Street Journal
"The empire that he [Mr Ebbers] built has crumbled to some extent"
Worldcom's new president, John Sidgmore
"We have had a lot of issues thrown at us relative to the loans that were given to Bernie"
The BBC's Mark Gregory
"Bernie Ebbers of WorldCom was one of the great dealmakers of the 1990s stockmarket boom"
See also:

12 Mar 02 | Business
Watchdog scrutinises Worldcom
07 Feb 02 | Business
WorldCom denies rumours on its fall
02 Oct 01 | Business
WorldCom to cut 1,000 jobs
08 Feb 01 | Business
Worldcom profit drops 44%
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