WorldCon:
A Case Study of WorldCom

ACCT 424B
Prof. R. Hayes
May 12, 2011

WorldCom is a telecommunications company that was once worth billions but is now merged with Verizon after bankruptcy due to fraudulent activities. The question is what caused one of the largest US corporations began a spiral into financial ruin. WorldCom according to John Sidgmore, a former top executive of WorldCom, stated that WorldCom generated annual revenues of over $30 billion a year, has more than 60,000 employees, over 20 million customers, and was one of the largest internet providers in the world. This made WorldCom a key component in the USA’s economy and communications infrastructure. Bernie Ebbers isn’t the founder of WorldCom but was a major factor in making LDDS which is a small start-up company in Mississipi that offered regional long distance discount services into a major global telecommunications company. Ebbers in 1997 stated that his goal was to be the number one stock on Wall Street. His plans were focused on mergers for growth relying on using WorldCom stock to finance the mergers. Ebbers acquired around 75 companies with the largest being MCI. This strategy of constant mergers for growth appeared to be working but making these mergers succeed is a difficult task. The main problem with mergers lies in the reorganization of the business to effectively incorporate the acquisitions. An area that suffered from these mergers was customer support and many began to wonder if WorldCom’s desire for acquisitions was greater than their ability to make acquisitions work. The beginning of WorldCom’s problems began with pressure to meet or beat analyst’s expectations. On the surface it appeared that WorldCom was meeting or beating expectations but things are not as they appeared. In July, 2000, “WorldCom’s expenses as a percentage of its total revenue began to increase,