WORLDCOM PUTS FAITH IN THE INSIDER

Faced with a leadership turnover, liquidity issues, an anemic stock price and an SEC investigation, WorldCom installs John Sidgmore as CEO. His first task is to try to overhaul the carrier's tarnished image.

One of the biggest tasks for John Sidgmore, the WorldCom vice chairman who was named president and CEO last week, is to convince everyone connected to the company, the telecom industry and Wall Street that WorldCom is not on the brink of collapse.

While that position is debatable, according to Sidgmore, WorldCom's biggest problem is the public's perception that the carrier has serious liquidity issues. Now he must convince Wall Street, the investing public, the media and, most important, his own employees.

“The accounting questions, the SEC investigation and all these things — relative to our financial position, we really feel [they] are not going to be material to WorldCom's future,” Sidgmore told analysts one day after being named successor to former President and CEO Bernard Ebbers, who stepped down.

Most analysts describe Sidgmore as the natural choice. At 51, he's at the right stage in life to take over a business of WorldCom's size. Guided largely by his understanding of technology, he has operational experience as head of UUNet and MFS Communications — both of which are now under the WorldCom umbrella — and he's familiar with the company, having served as chief operating officer in addition to vice chairman. Those who have worked with and for him described Sidgmore as candid and say he is a strong, even inspiring leader who is good with big-picture issues.

In a pair of conference calls with analysts and the media, Sidgmore said his first order of business will be to communicate more effectively with both groups about what he says is the company's solid financial position. WorldCom's failure to do so is part of the reason its long-term survival is in question and share and bond prices are at record lows, he said.

Such forthrightness will be a welcome change, said Drake Johnstone, analyst for Davenport & Co. WorldCom's handling of the events that led up to Ebbers' resignation was a “debacle,” he said, the low-point being last month's guidance revision that came after the markets closed on a Friday afternoon. “It's absurd for a major company to drop that bomb on the Street while people are heading off to the golf course,” Johnstone said.

The list of questions that must be addressed immediately by Sidgmore includes: how the company plans to meet its debt obligation, which jumps from $60 million this year to $1.6 billion next year; how it will fund growth when it doesn't have any excess cash on its balance sheet; and how its capex and cash flow numbers add up under the revised guidance.

“Until they put together a quarter or two where they make their numbers, people are going to be skeptical,” said Blake Bath, managing director at Lehman Bros.

Sidgmore's most difficult work, however, will be internal. According to him, one of his first tasks will be to re-energize the sales and services staff. Last-minute changes to the sales force's compensation structure have pummeled employee moral. To fix that, the service provider must change the compensation plan to match the current state of the company, said Blake Kirby, vice president of Adventis.

According to one former colleague, Sidgmore is a natural for that type of work. “John seems to not only have a sense of the market and where a company needs to go, [he also recognizes] that company culture and employee health and happiness are extremely important,” said Norm Laudermilch, vice president of managed services for VPN and firewall provider Riptech, who worked with Sidgmore at UUNet from 1996 to 1998 as global director of information security.

Indeed, Sidgmore's appointment likely will lead to a change in WorldCom's internal culture, which for years has been dominated by Ebbers and his penchant for acquisitions.

INHERITING AN EMPIRE
John Sidgmore takes the helm of a company built by an acquisition spree of more than 70 companies under the leadership of Bernard Ebbers. The most recent:
Date	Acquired	Asset
Dec. 5, 2001	Rhythms	DSL equipment & customers
Sept. 5, 2000	Intermedia	Web hosting via Digex
Oct. 1, 1999	SkyTel	Wireless messaging
Sept. 1, 1999	CAI Wireless	MMDS licenses
July 21, 1999	Wireless One	MMDS licenses
Sept. 14, 1998	MCI	Long-distance network
Feb. 2, 1998	ANS	Network services for AOL
Jan. 31, 1998	CompuServe	ISP network assets
Jan. 30, 1998	Brooks Fiber	CLEC assets
Dec. 31, 1996	MFS/UUNet	CLEC assets/IP backbone
Jan. 5, 1995	WilTel	Fiber backbone/microwave
Source: WorldCom company reports

WorldCom in many cases was overly bureaucratic internally while neglecting to address important external issues. Sidgmore will change that, said Timothy G. Smith, who worked as director of infrastructure applications development at UUNet from 1995 to 2000 and is now vice president of network engineering at Wayport, a builder of high-speed networks in airports and hotels.

According to one former sales rep in Atlanta who requested anonymity, the company's compensation system often was out of step with the current market and has led to an exodus of many of the industry's brightest and most aggressive sales reps.

“John's going to focus on financials and investors,” said Smith, “He'll focus on big-picture things.”

That attitude, said Laudermilch, will be passed down to the people Sidgmore deals with. WorldCom's acquisition binge over the past several years has left the employee base as “this floundering mass of people with no direction,” Laudermilch said. “John is the type of guy who can walk in and pitch a vision to employees and make them realize very quickly what they need to do to achieve success again.”

Part of that pitch will be aimed at maintaining and eventually growing WorldCom's customer base. In fact, Sidgmore said one of his tasks would be to create growth by establishing relationships with large customers.

Before anything else, however, WorldCom must stop the bleeding. As long as the company remains a whipping boy for the press and Wall Street, customer confidence will fall and competitors will use fear of disrupted service as a sales lever.

Laudermilch's company is a customer of WorldCom, and though he says Sidgmore is the best executive he's ever worked for, “as a medium-sized company that uses their services, I'm wondering what they'll tell me.”