MCI WorldCom To Lay Off 1,850
Washington Post Staff Writers
Friday, December 11, 1998; Page B01
MCI WorldCom Inc. will announce today that it is laying off 1,850 employees, or 2.5 percent of its work force, as part of a broad cost-cutting move after the recent merger of MCI Communications Corp. and WorldCom Inc., according to sources close to the company.
The job cuts include 100 positions in Virginia, 60 in Washington and 10 in Maryland, said the source, who asked not to be identified. Most of the jobs, deemed "redundant" because they were duplicated in the wake of the $40 billion merger, are in the network operations and information technology areas, and they include engineers and software programmers.
The layoffs are spread across MCI and WorldCom facilities across the nation. The combined company's headquarters is in Jackson, Miss., while its North American operations are based in the District.
Three-quarters of the positions to be eliminated, or about 1,390, are held by former MCI employees, the source said. That's roughly proportionate to the 59,000 MCI workers who joined WorldCom's 150,000 employees when the merger was completed three months ago.
Company spokesman Frank Walter would not comment on the prospect of layoffs yesterday.
The amount that will be saved through the layoffs was not available. They are part of a larger goal of saving $2.5 billion next year by eliminating redundant operations after combining the nation's second- and fourth-largest long-distance voice and data networks.
Of that amount, $1.2 billion in savings will come from shifting communications traffic onto MCI WorldCom's network, according to sources. MCI's long-distance trunk lines connect with WorldCom's local fiber-optics network here and abroad, allowing less reliance on the regional Bell companies or foreign phone companies, which charge fees for access. An additional $900 million in savings will come from non-salary expense in the sales, general and administrative areas.
The company's long-term goal is to save $5.6 billion by 2002 through efficiencies made possible by the merger.
Wall Street analysts said they anticipated a layoff announcement of this type since the merger.
"I think that the expense cuts that the company is announcing were widely expected and therefore pretty much reflected in the current stock price," said Tony Ferrugia,, telecommunications analyst for A.G. Edwards & Sons Inc., who noted that he is not recommending the stock.
WorldCom stock closed yesterday at $62.75, up 93 3/4 cents, on the Nasdaq Stock Market.
MCI WorldCom has seen a flight of top-level MCI executives from its ranks since the merger was completed, including MCI's chief executive, Gerry Taylor; its chief information officer, Lance Boxer, who went to Lucent Technologies Inc.; and its senior vice president for global engineering, Jack Norris, who moved to Teleglobe Communications Inc. Network World, a trade publication, this week cited "dozens of key managers and specialists," virtually all from the MCI side, who have left the company, primarily in the network engineering, security services and product management areas.
Rumors of more widespread layoffs -- of as many as 7,000 workers -- swept through the company over the past two weeks. Speculation also centered on the possible departures of former MCI network services president John Gerdelman -- who recently ceded the top network job to WorldCom veteran Ron Beaumont -- and Tim Price, who currently runs the company's U.S. operations and is the third-highest-ranking executive, behind chief executive Bernard Ebbers and Chairman Bert Roberts. MCI officials would not comment on those rumors.
Morale among former MCI employees has wavered in the three months since the merger's completion, according to former employees, some of whom just recently left the company.
"A majority of people have been concerned about WorldCom's previous behavior," said Dale Drew, former head of MCI's Internet security unit, who left the company nearly two months ago to join Qwest Communications International Inc.. "It's pretty common for [WorldCom] to come in aggressively and size up a situation, and at the worker-bee level there has been quite a large concern about that."
Drew said that when he left the company, he took with him nearly his entire security team after it was stripped of many of its responsibilities and asked to take on more of a consultative role.
Despite the planned layoffs, MCI WorldCom is still hiring aggressively in many areas. The company plans to build new headquarters for its UUNet division -- which provides Internet access services -- in Loudoun County. The headquarters is to house 4,000 employees by 2001 and will ultimately be able to accommodate up to 24,000 workers.
"We added 1,200 people, and the plan is to continue that [pace] for the next year," said Mara Radis, spokeswoman for UUNet.
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