WorldCom profit plummets

(Telephony) WorldCom’s net earnings were cut in half in the first quarter, but the company managed to meet analysts’ expectations on operating earnings and reported no change in financial guidance for the rest of 2001. The relatively good news increased WorldCom’s share price almost 5% in morning trading.

WorldCom reported a 49% drop in net income on slightly higher revenues in the first quarter. Net income fell to $610 million, or 20¢ per share, compared to $1.2 billion, or 41¢ per share, in the year-ago quarter.

The company was hit by one-time charges of $76 million for domestic severance packages related to its 7% work-force reduction and $94 million of expenses resulting from the impact of foreign currency exchange on Embratel, its Brazilian subsidiary. Excluding those charges, profits fell 38% to $745 million, or 25¢ per share, in line with analysts’ expectations, according to First Call/Thomson Financial.

Total revenues increased to $9.7 billion from $9.6 billion last year. WorldCom Group revenue rose 12%, driven by 22% growth in data and Internet services and 19% growth in international services. Business voice revenues declined 5% from a year ago.

MCI Group, the company’s consumer business, saw revenues decline to $3.6 billion from $4.2 billion in the comparable quarter of 2000. WorldCom said sales in consumer, long-distance and local services grew but were offset by reduced revenues from calling-card, wholesale and resale services.

“On the WorldCom side, we achieved our growth targets,…and, on the MCI Group side, we made excellent progress adjusting our business to maximize and maintain profitability and cash flow as far into the future as possible,” said a statement by Bernard Ebbers, WorldCom’s president and CEO.

WorldCom maintained its earnings forecast for 2001. It said WorldCom Group--the company’s data, Internet and international operations--will grow revenue 12% to 15% and produce cash earnings of between $1.25 and $1.35 per share.

For MCI Group--the company’s consumer, wholesale long distance, wireless messaging and Internet access businesses--management expects “declining, but stabilizing” sequential revenues and sufficient cash flow to service anticipated dividends and allocated debt. Yearly cash earnings will be between 25¢ and 30¢ per share.

WorldCom is in the process of splitting into two separate companies. Shareholders will vote on the proposal to create a tracking stock for the MCI Group at a June 7th meeting. If the stock is approved, WorldCom plans to distribute the tracking shares shortly thereafter.