Worldcom (Nasdaq: WCOM) tumbled 20 percent Wednesday following an announcement the company had lowered estimates and plans to create a tracking stock. Analysts downgraded the stock.
Shares were down 5.19 to 18.56 Wednesday morning.
Analyst Stephen J Shook at Wachovia Securities. downgraded shares to "neutral" from "buy." Worldcom was downgraded to near-term "neutral" from near-term "accumulate" by analysts Adam Quinton and Megan Kulick at Merrill Lynch. The long-term "accumulate" rating was maintained.
Worldcom plans to create a new MCI unit, which will be traded under the symbol MCIT, to encompass consumer, small business, wholesale long-distance voice and dial-up Internet access operations. Executives provided guidance in a Wednesday morning release for the new division's fiscal 2001 results.
News reports and rumors about Worldcom's plan for its consumer businesses have circulated for months. "It's my fault. Some of these assets should have been disposed of earlier," CEO Bernard J. Ebbers said Wednesday, speaking at a meeting with analysts.
Ebbers said the move could be the interim step to a spin-off, if the company decides to do so later.
"The margins are too high," said CFO Scott Sullivan. The company now has 41 percent EBITDA. "We need to be in the mid-30s EBITDA to sustain mid-teens revenue growth."
Consumer long distance revenue will be hurt next year, Sullivan said. "We expect downward pressure in 2001 as lingering effects of rate reduction," Sullivan said, referring to the 5-cents-a-day plan the company introduced.
The business will stabilize in 2002, he added.