Business & Finance
WorldCom Inc.'s growing problems were threatening to drive the company into bankruptcy after it admitted to improperly reporting almost $4 billion in expenses over the past five quarters. The telecommunications giant fired its chief financial officer over the matter, accepted the resignation of its senior vice president/controller, and said it would lay off 17,000 employees beginning Friday and sell noncore assets to try to save $1.6 billion. It also said it would restate results for all of 2001 and for the first quarter of this year, with analysts warning that the revisions could be the largest in corporate history. In response, the Securities and Exchange Commission ordered the Clinton, Miss.-based company to file, under oath, a detailed report on the irregularities, which it said were "of unprecedented magnitude." Meanwhile, WorldCom stock plunged still further on the Nasdaq exchange, to 20 cents a share. As of Jan. 1 it was trading at $15 and as recently as June 1999 it was at $64.
As expected, the spreading wave of bankruptcies engulfed the US's sixth-largest cable-TV operator, Adelphia Communications. The Coudersport, Pa.-based company and more than 200 subsidiaries filed for protection from creditors in federal court in New York. Adelphia's problems first surfaced in late March, when it disclosed that its founding family had borrowed more than $2 billion off the books, for which the company might be partially liable.
ITC-DeltaCom Inc., a leading provider of telecommunications services to businesses across the South, also filed for bankruptcy protection. The West Point, Ga., company and creditors agreed to a reorganization plan to trade $515 million worth of debt to equity.
In an about-face, another telecommunications giant, Alcatel warned it will lose money this year and is implementing even tougher measures to try to save 12 percent in expenses. As recently as April, the French equipment maker insisted it would turn an operating profit. The cost-cutting plans were not disclosed, but a source close to the company said they likely would include 10,000 more layoffs, on top of 34,500 job cuts that have been announced in stages since early last year.