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WorldCom slides on downgrades

2 min read

WorldCom shares fell 2 3/16, or 7 percent, to 31 9/16 on heavy volume Wednesday after a pair of analysts cut the stock in the wake of its $3 billion acquisition of Intermedia Communications.

On Tuesday, WorldCom (Nasdaq: WCOM) agreed to shell out $3 billion for Intermedia (Nasdaq: ICIX) mainly to acquire its Web-hosting subsidiary, Digex (Nasdaq: DIGX).

Company officials said it will likely sell off 60 percent to 80 percent of the Intermedia assets in a move to cut costs and avoid regulatory hassles.

On Wednesday, WorldCom was the Nasdaq's most actively traded stock with more than 49.7 million shares changing hands in early afternoon trading.

Lehman Brothers cut WorldCom from a "buy" rating to an "outperform" Wednesday while Wachovia Securities downgraded it from a "strong buy" to a "long-term buy."

WorldCom shares have scuffled in recent months, falling to a 52-week low of 32 9/16 in August after peaking at 61 5/16 in November.

PaineWebber downgraded Digex to an "attractive" rating from a "buy," saying that while the transaction will enhance Digex's power in the Web-hosting market, the structure of the deal does not directly compensate the minority shareholders.

In its second quarter, WorldCom checked in with a profit of $1.33 billion, or 46 cents a share, on sales of $10.2 billion.

First Call Corp. consensus expects it to earn 48 cents a share in its third quarter and $1.88 a share in the fiscal year.

Twenty-four of the 25 analysts following the stock rate it either a "buy" or "strong buy."