Editor’s note: Charles Davidson’s column appears on Mondays. Also, check out:’Black Friday at MCI: 20% of Cary Workforce Reportedly Laid Off’ at: www.localtechwire.com/article.cfm?u=1224&k=04&l=22 WorldCom makes people like my friend Myron look smart.
Myron’s one of those types who distrusts corporations, distrusts the government, distrusts big-time sports. He’s beyond skeptical. He thinks the public at large, not just shareholders, should be allowed to vote for directors and executives at huge corporations. His theory is that big companies control so much wealth and wield such immense political power that the people deserve a say.
I don’t completely buy into Myron’s conspiracy theories by any means. But in the wake of Enron, Xerox, Martha Stewart and of course WorldCom, it’s tough to argue that the people running big corporations aren’t money-hungry scoundrels with no regard for the peons in the cubicle farms who are buying shares for the family nest egg.
WorldCom, Enron, Xerox, Wall Street analysts, investment bankers and a lot of others are, or surely look to be, cheating. Plain and simple. They’re fudging numbers and they know it.
By most measures, more people are thinking like my friend Myron. In a poll in The Atlanta Journal-Constitution, 86 percent of 2,216 people said they think the WorldCom and Enron scandals are “the tip of the iceberg.”
In the case of WorldCom, it hits pretty close to home for Atlanta. Not only is the company firing at least 450 of its 3,700 Atlanta-area employees — that’s the number for now but it could certainly rise — but Mississippi-based WorldCom and its brash former chief Bernard Ebbers loomed large in shaping the telecommunications industry in the South and in Atlanta.
A native of Canada, Ebbers built an obscure company into a one-time powerhouse through a series of audacious acquisitions worth about $50 billion combined. Atlanta and Georgia were important parts of Ebbers’ grand strategy.
In 1992, WorldCom, then known as LDDS, bought Atlanta-based Advanced Telecommunications Corp., ATC, in a deal worth about $500 million. At the time, both companies had annual revenue of about $350 million, peanuts compared to the long-distance giants AT&T and MCI.
The next year, LDDS became the fourth largest long-distance company in the United States through a three-way merger with Atlanta-based Resurgens Communications Group and Metromedia Communications Corp. of New Jersey.
These deals built not only Ebbers’ legend, but also burnished the reputations and made scads of cash for Atlanta executives including Stephen Raville of ATC and Jack Phillips of Resurgens and their shareholders.
Not only that, but WorldCom and Ebbers were models for a bunch of mini-WorldComs around the region: guys who started with small, local phone companies and gobbled up other similar companies to eventually build pretty big companies and amass fortunes. West Point, Ga.-based Cam Lanier and the ITC Holding Co. are the most prominent examples. In fact, the long-distance company that ITC built after the business was de-regulated during the 1980s, Telecom*USA, was acquired by MCI in 1990 for more than a billion dollars.
More WorldComs to come?
There was even a mini-Cam Lanier in my tiny hometown of Atmore, Ala., where an ambitious scion of the family that owned the local independent phone company, originally called Southland Telephone, acquired and started various other companies. Southland became Touch One Long Distance and that operation has, like WorldCom and ITC, run into its own problems.
That’s not to say that ITC, Touch One and others are faking numbers, as WorldCom did to the tune of $3.8 billion. But Myron and a lot of others won’t be surprised if we see a lot more WorldComs. Turns out growing from $300 million in annual revenue to more than $20 billion in 10 years might not be such a good and natural thing.
The bigger question going forward is the public perception of corporate America. So many of us toil at big companies and depend on them for livelihoods. Yet as trust in big business erodes, and people like Ebbers live on with enormous severance packages — $1 million-plus a year for life — while legions of worker bees must find paychecks where they can, you have to wonder whether a fundamental shift in public thinking is afoot.
Maybe the next big rise in the Nasdaq and Dow — whenever that is – will restore faith in the marketplace. Maybe it won’t.