MCI Reports 1Q Loss, Plans 7,500 Layoffs

McLEAN, Va. (AP) -- MCI plans to eliminate 7,500 jobs this year--about 15 percent of its work force--to cut costs as it struggles with weak revenues that resulted in a quarterly loss of $388 million, the company said Monday.

The company's release of quarterly earnings was the first for the company since it emerged last month from nearly two years of bankruptcy protection and changed its name from WorldCom.

The $388 million, or $1.19 per share, loss compared to a net profit of $52 million in the year-ago quarter. The company said the weaker performance stemmed from the intense competition on prices within the industry, resulting in lower revenues.

"Although we made significant strides in restructuring the company during the past year, overall industry conditions and an unfavorable regulatory environment affected our first-quarter results," said Michael Capellas, MCI president and chief executive officer.

The company said it expects to eliminate 7,500 jobs in the second half of the year. MCI employs about 50,000 workers, and in March announced layoffs of about 4,500 workers.The combined elimination of 12,000 jobs will save the company $600 million a year once fully implemented, said Capellas, who added that cutting jobs "is always our last option."

The company did not specify what jobs would be cut and what locations would be affected. Besides its headquarters in Ashburn, the company's largest offices are in Tulsa, Okla.; Colorado Springs, Colo.; Hilliard, Ohio, and the former corporate headquarters of Clinton, Miss., according to the company's annual report.

"We clearly have more work to do to align our cost structure with the changing industry conditions," Capellas said.

The company estimated that the layoffs and other cost-cutting would allow it to return to profitability in the second half of the year.

Quarterly revenue declined almost 13 percent year to year, from $7.23 billion in 2003 to $6.30 billion this year. The company has lowered its revenue projections several times in recent months citing pricing pressure in the industry, and some analysts have said the company's current projection of about $21 billion in revenue for 2004 is still too optimistic. The company generated $27.3 billion in revenue in 2003.The revenue figures include the Brazilian telephone company Embratel, which MCI is in the process of selling. Excluding Embratel, revenues decreased 18 percent, from $6.6 billion in the year-ago quarter to $5.4 billion this year.

MCI chief financial officer Bob Blakely said the company hopes to list its shares, of which there are about 326 million, on the NASDAQ exchange in the next few weeks.

Over-the-counter prices dropped nearly 8 percent from $14.25 to $13.15 as of market closing Monday. But the shares regained nearly all of their losses in after hours-trading, increasing to $14.20 in the first 90 minutes after the market closed, when the earnings and job cuts were announced.