MCI Communications Corp. yesterday joined the list of area companies that are paring back amid the general economic downturn and said that it will eliminate about 1,500 jobs nationwide over the next six months.
MCI said it did not know yet how many jobs would be lost in the Washington area, where the company has about 5,000 employees, about one-quarter of its total. Company President Bert Roberts said he expected "some consolidation, some displacement" in local facilities.
General economic conditions and intense competition in the $55 billion-plus long-distance telephone market were forcing the change, the company said.
Known for stellar growth year after year, MCI has seen its expansion slow to a crawl recently as market leader American Telephone & Telegraph Co. has moved aggressively to recapture market share and as expansion of the long-distance market has faltered because of the economic turndown.
Roberts said yesterday that if current trends continue until December, MCI's revenue growth would be "flat" for the quarter compared with the previous one. That would be highly unusual for the company.
MCI said it plans to consolidate seven regional divisions into four, closing regional headquarters in St. Louis, Denver and Arlington. The functions of the Arlington operation will be shifted to Rye Brook, N.Y.
However, MCI will create a new national headquarters in Arlington for coordination of residential services, softening the impact on area employment, Roberts said. MCI also said a new network-services division will be located in Washington to oversee provision of customized long-distance services to corporate customers.
Reports yesterday in the Dallas Morning News that a major restructuring was about to be announced, possibly to include the retirement of Chairman William McGowan, sparked a massive sell-off of MCI shares, making it the most actively traded over-the-counter issue. The price closed at $30 a share, down $1.87 1/2. During the day it had touched $28.75.
Roberts denied last night that McGowan's role in the company will change in any way. "William is healthy, he's fine, he's sitting in the next room and is clearly not in a retirement mode," Roberts said. McGowan, who had a heart transplant in 1987, was admitted to a hospital in April of this year for exploratory chest surgery, but there was no further explanation.
MCI is the nation's second-largest long-distance company and last cut its staff in 1986, letting go about 2,400 people, or 15 percent of its work force. After that, the company began growing quickly again, expanding to more than 19,000 employees at the end of last year.
"We're a company that reorganizes a lot," said Roberts. " ... I think that's a forte of the company." The new steps will make MCI more efficient to help it meet new market conditions, he said.
Through its history, MCI has publicly held to a management philosophy that the company helps maintain its dynamism though a relatively rapid turnover of people and that employees should not view it as a permanent employer.
For years a favorite of Wall Street, MCI has seen its share values tumble this year and its growth stall. Market leader AT&T, according to many analysts, has managed through new deregulation and aggressive new cost-cutting tactics to slow or halt a long decline in its share of the fast-growing market.
Last month, MCI reported its first quarterly loss since 1986, caused by a one-time charge against earnings taken as part of an equipment modernization plan. Its stock plunged, but many analysts said that investors were less concerned about the loss, which had been expected, than about soft quarter-to-quarter revenue growth.
The company, which will have revenue of more than $7 billion this year, continues to stand up well in competition, Roberts said. But it finds that due to the slowdown in the economy, both use of its telephone network and installation of new lines are slowing down.
MCI said yesterday that its earnings are likely to suffer in coming quarters due to these conditions and the continuing costs of absorbing Telecom USA, an Atlanta-based regional long-distance carrier MCI bought for $1.25 billion this year. " ... We've known for some time it was going to be dilutive to our earnings," Roberts said.