The tracking stock was created Thursday when the telecommunications company restructured its business units to create two separate tracking stocks, MCI Group and WorldCom Group. The separation gives shareholders an opportunity to invest in either WorldCom's growing data and Internet business or MCI's struggling long-distance business.
"Frankly, I'm surprised the stock's holding up above $18," said Patrick Comack, an analyst at Guzman & Co. "If I were an investor, I'd want to get more than a 13 percent yield from a company that's going to see its revenue base and profits declining significantly in the next two years."
In its most recent quarter, WorldCom posted a profit of $729 million, or 25 cents a share, on sales of $9.7 billion, down from $1.28 billion, or 44 cents, in the year-ago quarter.
The WorldCom Group accounted for $6.1 billion of total sales, up 12 percent from the year-ago quarter, with 22 percent growth in data and Internet services and a 19 percent increase in international services.
In that same period, the MCI Group posted sales of $3.6 billion, down from $4.2 billion in the same quarter of 2000. Company executives said they expect declining revenue in the MCI Group, with earnings of between 25 cents and 30 cents per share in 2001.
Other telecommunications giants, including Sprint and AT&T, have employed similar tactics of late, separating their wireless and Internet businesses from their core long-distance businesses.
Each share of WorldCom's common stock was converted into one share of WorldCom Group stock and 1/25th of a share of MCI Group stock. WorldCom Group, which closed off 57 cents to $17.85, continues to trade under the "WCOM" ticker symbol.
Comack said he expects MCI Group's year-over-year sales to fall 15 percent in fiscal 2001 and 20 percent in fiscal 2002.
"Every business in MCI is hurting right now," he said.