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Flashcards in Ch 2 WorldCom Deck (31)
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1

What went wrong at WorldCom?

It was all about money (and power and ego)

2

What went right at WorldCom?

Committed to doing the right thing

3

What was learned in the aftermath of WorldCom?

Successful organizations depend upon ethical leadership, values, reinforcement, and ultimately culture

4

In a nutshell, what were WorldCom's five phases of growth and transformation?

1) Emergence of LDDS
2) LDDS to WorldCom
3) Expansion into Local Markets and Internet Service
4) Consolidation of Leadership in Local and Long Distance Telecommunications Services
5) The Downturn for Telecom and World Com ("The Perfect Storm")

5

What does LDDS stand for?

Long Distance Discount Services

6

In what year did a group of investors form a small telecommunciations reseller called LDDS, which was licensed to provide long distance service in Mississippi?

1983

7

In 1984, LDDS' annual revenues totaled roughly how much?

$1 million

8

In 1985, who was elected CEO of LDDS?

Bernie Ebbers

9

True or False.

In 1989, LDDS merged with Advantage Companies, Inc. becoming a bigger private company.

False (became public company)

10

From 1984 to 1989, LDDS revenues jumped from how much to how much?

$1 million to $116 million

11

How did LDDS become WorldCom?

- 1992, LDDS merged with ATC
- 1995, LDDS acquires WilTel Network
- April 1995, LDDS changes name to WorldCom, reflecting global presence

12

After LDDS became WorldCom, what did annual revenues jump to ? What did debts total?

$3.9 billion rev; $3.4 billion debt

13

True or false.

In 1996, WorldCom acquired MFS to expand into local and internet services. Its annual revenues equalled its debts at $4.8 billion.

True

14

After what merger did WorldCom establish itself as a leader in local and long distance?

- Merger with MCI
- Annual revenues @ $17.6B
- Debt @ $21.2B

15

True or false.

Although the specific number varies depending on the source, WorldCom acquired over 60 companies from 1983-2001.

True

16

In what year did WorldCom's stock reach an all-time high?

1999 @ $96.76 per share

17

With whom did WorldCom fail to merge with because the government feared it would put too much market power in the hands of a single company?

Sprint

18

True or false.

In 1983, LDDS had revenues of less than $1 million. In 2001, WorldCom had annual revenues of $35 billion.

True

19

Fill in the blanks.

In two decades, LDDS evolved from a ____ phone company to a _____ communications company through a series of more than ____ acquisitions.

- local
- global
- 60

20

What were the market conditions of the perfect storm in 2000?

- tech boom ends
- recognition of overcapacity in telecom markets and prices for telecom services drop

21

In the face of a falling stock price in 2000, why did the BOD approve loans to Ebbers totaling over $75 million?

In order to prevent Ebbers from selling stock to pay outstanding debts
(Ebbers had pledged WorldCom stock as collateral for business and personal loans)

22

On April 30, 2002, who resigned as President, CEO and Director of WorldCom?

Bernie Ebbers

23

On May 14, 2002, who did WorldCom terminate as its independent auditor?

AA (retains KPMG as its independent auditor)

24

Who dominated the course of WorldCom's growth, as well as the decisions of the BOD?

Bernie Ebbers

25

WorldCom put extraordinary pressure on itself to do what?

Meet analyst expectations (and created an environment in which meeting analyst expectations became more important than accurate financial reporting)

26

How was WorldCom's fraud discovered?

It was uncovered by WorldCom's Internal Audit Department

27

In general terms, WorldCom overstated its reported net income by doing what?

Capitalizing line costs

28

On July 21, 2002, WorldCom and substantially all of its US subsidiaries filed voluntary petitions for bankruptcy under Ch. 11 of the US Code, enabling WorldCom to do what four things?

1) Create the greatest possible value for creditors
2) Preserve jobs for employees
3) Continue to deliver top-quality service
4) Regain financial health and focus

29

How much was WorldCom's bankruptcy filing?

$103 billion

30

WorldCom committed to doing the right thing by doing what?

- Turning itself in