2HRS2GO: Ebbers' WCOM margin call comes in

COMMENTARY -- What was the CEO of Worldcom (Nasdaq: WCOM) thinking when he bought millions of his company's shares on margin? Worldcom isn't saying, so we can only speculate about conversations leading up to the decision...

Damn it, what is wrong with Wall Street? Our share price has been falling since November. Can't they see we're a good company?

I think the Sprint (NYSE: FON) failure took a lot of air out of our stock, Bernie.

How does that deal matter? We're still the same company they thought was worth 80 bucks back before we ever took a run at Sprint. Or 54 if you factor in the 3-for-2 split.

More and more people are fretting about our wireless strategy. Or apparent lack of one.

You'd think they would trust us to work something out.

Maybe Wall Street is tired of waiting.

The Street will have to keep waiting unless it drives our valuation higher. There has to be something we can do to show confidence in the stock.

How about a stock buyback?

Have you checked our balance sheet? Our $664 million in cash doesn't provide much muscle when you have 3 billion outstanding shares, so give me another idea.

Got any promising deals in the acquisitions pipeline?

Do you pay any attention at all? I can't buy any companies if WCOM stock keeps falling. No, this needs a more personal touch, a gesture that tells investors that I, President and CEO Bernard Ebbers, believe strongly in Worldcom.

You're going to let us have watercoolers and company cars?

Just FYI: you're dumb as a stump, or even worse, a member of the media. Anyway, I think it's time to add a few million WCOM shares to my portfolio. Besides, it's a good buying opportunity, the stock is cheap right now.

Bernie, I know you're a rich guy on paper, but do you have cash readily available to buy that much stock?

Relax, I'm a microcosm of our company. I should be able to get some leeway from my broker -- I'll buy on margin.

Do you pay any attention at all? Haven't you read about margin buying lately? People got killed on that back in the spring, and it's still a bad market to be borrowing money for stock purchases. If you buy Worldcom stock now and it dips any more, your broker will issue a margin call and then you're up the Mississippi River without so much as a teaspoon for rowing, let alone a paddle.

I run a company with more than $18 billion in long-term debt. I used my first motel as loan collateral to build a small chain of them. Every business venture I've ever undertaken started out with my borrowing.

You sure about this? You don't want to end up like that Track Data (Nasdaq: TRAC) CEO, Avis or whatever his name is.

Barry Hertz. This is different -- he was speculating in stocks, got caught up in his own company's hype about day-trading. But you and I both know Worldcom is a solid company. We're not some dot-com momentum play, we own the biggest backbone, we're growing at a 15 percent clip annually off a huge base, we're the only company offering an end-to-end communications network for businesses. Our stock has to reflect that at some point.

I believe you were talking about getting caught up in your own hype...

Am I wrong about our company?

Not necessarily, but that doesn't mean you should margin yourself for it. Why not just work on the old-fashioned stuff, like growing operations and keeping tight cost controls? Like you said, Wall Street has to recognize the results someday.

I'm always focused on running the company. But how does it hurt to buy my own company's stock?

If your margin call comes, not only will you look foolish, but you'll be forced to sell WCOM shares to cover it and then the stock goes down even further.

Life is about taking chances for your beliefs, and I have faith in Worldcom.

So do I. But don't let faith get in the way of sound financial judgement. 22GO>