Embattled service provider WorldCom was seeking to reassure its worldwide customers yesterday that, despite the huge $3.8bn (£2.49bn) accounting scandal enveloping the company, services will continue as normal,
But analysts have questioned whether the company could really follow through on that promise.
When announcing its massive accounting discrepancy WorldCom said it would begin to start laying off 17,000 employees this Friday. Although the cut had already been announced weeks before, analysts suspect that the job cull has been speeded up and that the size and the speed of he cuts will hit customers.
‘Although WorldCom says its customers’ service will not be interrupted, it is hard to see how it will be able to deal with customer problems as quickly as they may expect,’ said Kate Gerwig, principal analyst at CurrentAnalysis.
Although analysts are uncertain whether WorldCom will be able to avoid filing for bankruptcy protection, they do predict that many of its customers will quickly start to seek alternate carriers. The carriers they turn to may be the very ones that WorldCom and others aimed to replace. ‘This is great news for the Deutsche Telekoms and British Telecoms of the world,’ said Gerwig.
While established carriers may benefit, companies especially hard hit by WorldCom’s problems were its equipment suppliers. While WorldCom’s announcement hit stocks across the American exchanges, Lucent Technologies saw its stock drop 20 per cent while Nortel Networks closed down 9% on the day.
Juniper Networks, which attributed more than 10% of its last quarter revenues to WorldCom sales, saw its stock drop 18.4%.
WorldCom’s auditing error stands as the biggest accounting debacle in US corporate history and yesterday, President George Bush even entered the fray saying he was ‘deeply concerned’ about the news.
He called for a full investigation and for anyone responsible for misleading WorldCom investors and employees to be prosecuted.
WorldCom is already under investigation by the US Securities and Exchange Commission but the Department of Justice is expected to begin its own inquiry.