High marks for Capellas’ first 100 days

You have to give WorldCom CEO Michael Capellas credit for achieving what he has in 100 days. For a complete telecom outsider to stabilize and then give direction to a bankrupt carrier laden with $40 billion in debt and wrestling with an $11 billion accounting scandal is, well, fairly miraculous. This will be the stuff of business school case studies.

You have to give WorldCom CEO Michael Capellas credit for achieving what he has in 100 days. For a complete telecom outsider to stabilize and then give direction to a bankrupt carrier laden with $40 billion in debt and wrestling with an $11 billion accounting scandal is, well, fairly miraculous. This will be the stuff of business school case studies.

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In a staged, outdoor rah-rah fest in front of a few hundred employees waving company-provided signs that said things like “Focused and fast,” Capellas said he sometimes affectionately equated working through the 100-day plan with a death march.

While that seems an odd analogy, it might be truer than we know. Only time will tell how close the company came to calling it quits.

But Capellas deserves to be proud of recent achievements. In 100 days the company has:

• Appointed a new management team and a new board.

• Completed a three-year strategic plan.

• Rebranded the company MCI and launched a media blitz to drive it home.

• Convinced 90% of its debtors to sign on to a reorganization plan that reportedly will pay out 36 cents on the dollar.

What’s more, Capellas says first quarter sales were up 30% compared with the fourth quarter, the company returned to profitability in the month of January, and cash flow remains positive. MCI has about $3 billion of cash in hand, he says.

Ultimately the company hopes to emerge from bankruptcy later this year with only $4.5 billion to $5.5 billion in debt.

Just as impressive is MCI’s ability to look to the future even as it struggles to leave the past behind. Part of the new three-year plan calls for pushing a convergence story based on the company’s strong Internet heritage and global presence. While this might help land customers, it also could help reduce costs. The plan is to have 25% of MCI backbone voice traffic based on IP later this year.

For all of that, MCI still faces a tough uphill battle. The company expects revenue this year of $25 billion, down from $35 billion in 2001, and expects $26 billion in 2004. That might be optimistic given many customers are locked into three-year or longer contracts, and we haven’t seen the last of how they will vote as the contracts expire.

But goodness knows we need the diversity a healthy MCI would provide.