—— Forwarded Message From: Jeff Pulver
Hey Ian,
Sometimes they print the stuff you just don’t expect them to…Jeff
———- Forwarded message ———- The Rise and Fall of Bernie Ebbers: Profile
A downbeat end to a remarkable career: Humble beginnings: Teenage milkman transformed himself into telecom leader
Mark Evans 1 May 2002
In the past 40 years, Bernie Ebbers’ career has been remarkable in its variety and trajectory.
>From humble beginnings as a teenage milkman in Edmonton, he morphed himself
into a high school basketball coach, a warehouse manager, a hotel operator and, finally, one of the leading players in the North American telecommunications industry.
This extraordinary run came to an ignominious close on Monday when Mr. Ebbers stepped down as WorldCom Inc.’s chief executive amid a slumping stock price and an investigation into the company’s finances by the U.S. Securities and Exchange Commission.
Officially, WorldCom said Mr. Ebbers decided to step down on Friday amid pressure from directors disappointed about the steep decline of the company’s stock, which has lost 96% of its value since hitting a record high of US$64.50 in June, 1999.
Unofficially, Mr. Ebbers appears to have been a victim of a loss of credibility. The vision he sold to Wall St. in the 1990s, which made WorldCom the second-largest U.S. long-distance company, has lost its audience. Even Salomon Smith Barney analyst Jack Grubman, who had been WorldCom’s loudest and longest cheerleaders, finally surrendered his “buy” rating last week.
Then, there is the delicate matter of the US$375-million Mr. Ebbers owes WorldCom. He was forced to borrow the money to cover margin loans after he unsuccessfully speculated on WorldCom stock — a move Business 2.0 magazine ranked as one of the “101 Dumbest Moments in Business.” To repay the loan, Mr. Ebbers will likely have to sell many of his assets, which include a yacht maker and a 164,000-acre ranch in British Columbia that was purchase in 1998 for US$67-million.
It is ironic that Mr. Ebbers’ decision comes less than a week after BCE Inc. CEO Jean Monty surprised investors when he announced his resignation. It was only a short time ago that both executives were being hailed as geniuses and visionaries. Today, they have walked away from the telecommunications industry with their tails between their legs.
Jeff Pulver, president and CEO of Pulver.com Inc. in Melville, N.Y., said Mr. Ebbers will be known as a “hotelier who should have stayed a hotelier.”.
While Mr. Ebbers, 60, has received much of the credit for building WorldCom, Mr. Pulver said his strategy was executed by brilliant executives such as Vinton Cerf, who is regarded as one of the Internet’s founding fathers, and John Sidgmore, a technology visionary who was appointed as Mr. Ebbers’ replacement.
Mr. Pulver is just one of Mr. Ebbers’ many critics who have watched the Jackson, Miss.-based company struggle recently. WorldCom, one of the telecom industry’s stars during the 1990s, has been hammered by falling prices within the long-distance market and the Internet’s slower growth. Investors, who have watched the company’s market capitalization tumble by more than US$2-trillion during the telecom meltdown, are worried about the company’s US$28-billion debt and the possibility it might have to file for bankruptcy protection.
It is clearly a challenging environment, and Mr. Ebbers was unable to maintain his grip on the corporate helm — even though he is WorldCom’s largest shareholder
While the conclusion of Mr. Ebbers’ career at WorldCom is one shrouded in controversy and disappointment, it should be weighed against what he accomplished since he started the company from scratch nearly 20 years ago.
After growing up in Edmonton, the 6-foot-4 Mr. Ebbers accepted a basketball scholarship at Mississippi College, a Baptist school, in Clinton, Miss. Following a stint as a high school basketball coach, he took a job managing a garment warehouse. In 1974, he borrowed money from co-workers to buy a motel-restaurant in Colonel, Miss. During the next nine years, he went on acquire nine Best Western motels.
WorldCom’s origins go back to 1983 when he met two local businessmen at a coffee shop in Hattiesburg, Miss., to map out a plan for a new business to re-sell long-distance services to local businesses. Long Distance Discount Services grew by leaps and bounds through an aggressive acquisition strategy.
The company, which changed its name to WorldCom, became an industry heavyweight after making more than 70 deals, which included the US$2.5-billion purchase of Williams Telecommunications Group Inc., the US$12.5-billion acquisition of MFS Communications Co. Inc. and the US$44-billion purchase of MCI Communications Corp.
Darron Carpenter, an analyst with PNC Advisors, said critics enthusiastically engaged in Ebbers-bashing are demeaning the impact Mr. Ebbers had on the telecom industry. As much as Mr. Ebbers may have made some strategic mistakes, Mr. Carpenter said, he fell victim to circumstance and market conditions.
“From a personal standpoint, I think Bernie Ebbers is a great guy,” he said. “Unfortunately, he fell victim to having too much of a belief in his own company. He had a definite belief in the company, what the company was doing and his own leadership abilities.”
Mr. Carpenter said that Mr. Ebbers’ Achilles’ Heel was perhaps the fact he owns 27 million WorldCom shares — an issue that may have clouded his judgment.
“The one thing I have to wonder about is whether there is some type of moral hazard that comes into play when your own personal fortunes are so closely tied to the company,” he said. “I wonder if [Mr. Ebbers] pulled the wool over his own eyes because of the shares he owned. Was there an inability there to make an objective call?”
—— End of Forwarded Message