In 1984, Long Distance Discount Service (LDDS) was created by Murray Waldron and William Rector in Hattiesburg, Mississippi and began operations as a long distance reseller. Bernie Ebbers was named CEO the next year. Ebbers was able to grow the company through numerous acquisitions and mergers over the course of 15 years. After expanding around the globe the company changed their name to WorldCom. (Ferrell 1) WorldCom was able to complete 65 acquisitions in this time and became an industry leader in telecommunications. However, WorldCom began overextending themselves in their quest for acquisitions which started their downfall (Patra 172).
Between 1991 through 1997, WorldCom spent almost $60 billion in acquiring these companies which also led to $41 billion in debt. WorldCom was one of the most successful companies at the height of the internet boom. Wall Street began to take notice of WorldCom and its CEO, Bernie Ebbers. “Wall Street investment banks, analysts and broker began to discover WorldCom’s value and make strong buy recommendations to investors” (Patra 173). As WorldCom’s stock rose, it became easier for the company to utilize stock to continue to purchase additional companies.
WorldCom mad their biggest acquisition in November, 1997 when they acquired MCI communications for $30 billion in WorldCom stock. In this deal, Bernie Ebbers agreed to assume $5 billion in MCI debt. As a result, the total value of the deal for WorldCom was $35 billion. In contrast, British Telecommunications Corporation made a $19 billion offer for MCI. WorldCom’s offer was 1.8 times the value of the British Telecommunication Corporations’ offer. This made WorldCom a significant global telecommunications company (Patra 173). The problems f...
... middle of paper ...
...te of time” (SEC 18)
The Origin of WorldCom’s Accounting Fraud
Line Costs
WorldCom’s network could not directly connect to every possible phone and electronic device in the world. As a result, the company had to utilize third parties to carry some part of their calls. WorldCom would have to lease the facilities of the 3rd parties. These fees were referred to as “line costs.” Line costs accounted for about half of WorldCom’s total expenses. Taking this fact into account, managing line costs was important to WorldCom’s bottom line. WorldCom management met in quarterly line cost meetings. In these meetings management was pressed for line costs reduction ideas. As economic conditions worsened, the search for cost savings became more intense and Ebbers and Sullivan became agitated and raised their voices demanding improved margins” (Zekany, Braun and Warder 104).
telephone as a major constant business tool. This multi-line digital phone sets the new standard in easy
MCI is at a critical point in their company history. After going public in 1972 they experienced several years of operating losses. Then in 1974 the FCC ordered MCI's largest competitor AT&T to supply interconnection to MCI and the rest of the long distance market. With a more even playing field the opportunities to increase market share and revenue were significant. In order to maximize this opportunity MCI required capital. Their poor financial performance required them to use less traditional instruments to obtain financing. The capital acquired supported their growth until they reached a level of profitability in 1978. Subsequently they continued to increase their net income and the quality of their balance sheet. With continued prospects for growth tempered with some regulatory uncertainty they need to determine their optimal financial structure for the future.
While Enron was the complicated fraud, WorldCom fraud was the simplest one to commit. WorldCom which is now known as MCI and acquired by Verizon Communication since 2006 was founded in 1983 to create a discount long-distance provider. The company grew very rapidly in the 1990s because of several large acquisitions (Beresford, Katzenbach, & C.B. Rogers, 2003) WorldCom completed 3 mergers in 1998 and one of the merger was the acquisition of MCI Communications Inc for $40 billion, the largest merger at that time. WorldCom also merged with Brooks Fiber Properties Inc for $1.2 billion and CompuServe Corp for $1.3 billion (The rise and fall of WorldCom, 2008). WorldCom announced the merger with Sprint Corp. in 1999 and its shares’ price went up for more than $64 but, the merge was blocked by regulators in both the U.S. and Europe because they concerned that it would create a monopoly in 2002 (The rise and fall of WorldCom,
Scharff, M. (2005). WorldCom: A Failure of Moral and Ethical Values. Journal of Applied Management and Entrepreneurship .
Cisco is one of Americas greatest corporate success stories. Since shipping it’s first product in 1986, The company has grown into a global market leader that holds No.1 or No.2 market share in almost every market section in which it participates. Cisco went public in 1990 on the nasdaq stock market with annual revenues at $69 million in that year. But now their revenues are at $12.2 billion in fiscal 1999. Their revenues in the last four quarters are shown in the figure below.
Atlantic Computer is a large manufacturer of servers and other high-tech products. They are known for providing premium high end servers. Atlantic Computer’s is in the process of introducing Tronn, a new basic server, which includes Performance Enhancing Server Accelerator (PESA) software. This software will allow Tronn to perform up to four times faster than its standard speed. Therefore these two new products were specifically designed to sell as a bundle or “Atlantic Bundle.” Jason Jowers, fresh off of his MBA degree is responsible for developing the pricing strategy for the “Atlantic Bundle. After much research Jowers narrowed down to four different routes on how the bundle can be priced: status quo, competitive, cost-plus, or value-in.
Akamai Technologies, Inc. is an organization which delivers the content over the Internet. It is one of the largest organizations which provide the distributive Computing Platforms; it provides a cloud based services to the end user. It serves 30% of the overall web traffic. Akamai provided numbers of servers which are located all over the globe and stores the web application of the clients. It provides a faster access to those applications because of the distributive contents in to various servers around the world. Akamai does not want the long routes to it distributed the data based on the locations, it works as like a work or a task which is not possible to be completed by a single persons is divided in to multiple process or threats or assign to teams to complete their individual part, so that task can be complete faster, in the same way the contents are stored at different servers based on their access mechanism.
One.Tel was launched by Jodee Rich and Brad Keeling in 1995 (Cook, 2001). At first, it looked to get the advantages from deregulation of telecommunication industry by reselling other network’s capacity and making money through stock market speculation. Rich and Keeling tried to increase the company’s shares rather than to profit the company (Cook, 2001). Initially, One.Tel used to develop the culture of strong teamwork and togetherness. There was no hierarchy in the structure of the company. However, the dissonance of its culture and system is the main factor that led to One Tel decline.
In an interview with James Wetherbe, Richard M. Schulze tells of how at eleven-years-old he became an entrepreneur in St. Paul, Minnesota as a paperboy. This newspaper boy would grow up to be founder of the world’s largest consumer electronics chain store, Best Buy Co. Inc. (Schulze, 2014). As an adult in 1966 Schulze partnered up with Gary Smoliak and opened the company called Sound of Music until 1986 (Bailey, 2015). Schulze bought out Smoliak around 1970 and by 1983 he had changed the name of the company to Best Buy Co., Inc. Four years later Best Buy Co., Inc. secures an entry on the New York Stock Exchange. During the early 1990’s Best Buy Co., Inc., had become the largest consumer electronics store in the United States.
The total assets of the company were estimated to inflated by about $11 billion by the end of 2003. They overstated the cash flow and profit margins significantly to disguise its decreasing earnings to maintain the price of WorldCom’s stock by fraudulent accounting methods (web), which should be found by their auditor – Arthur Anderson (one of the former Big Five accounting firms and then bankrupted in 2001). According to the Economist (), WorldCom scandal resulted in many negative impacts on its auditors and American economy even the world. Andersen was not only sued and lost its reputation but also dented the confidence in American accounting. Additionally, WorldCom’s share price had fallen from a peak of over $60 to below $2 a share by several months. Before New York stock opened, Japan 's Nikkei, Germany 's Dax and France 's CAC 40 each fell by over
Cisco Systems, Inc. is a leader in networking for the internet, they develop hardware, software, and services to help create internet solutions that make internet networks possible. Cisco was founded in 1984 by a small group of computer scientists from Stanford University. They are a worldwide company with headquarters in: San Jose, California, Amsterdam Netherlands, and Singapore. Currently, they employ approximately 74,000 people throughout the world. Cisco operates on a set of values which include: change the world, intensely focus on customers, make innovation happen, win together, respect and care for each other, and always do the right thing. They show these values through global involvement in education, community, and philanthropic efforts. (Cisco, 2004)
Kondisetty, Sudhakar (April 05, 2001). VoIP in your contact center – much more than cheap phone calls. [Electronic version]. ComputerWorld. Retrieved on May 20, 2004, from http://www.computerworld.com/softwaretopics/crm/story/0,10801,59262,00.html
The Computron, Inc. is facing problems regarding pricing the bid for Computron 1000X, future functioning of Frankfurt plant, impact on production due to current market breakdown.
WorldCom began as a small provider of long distance telephone service. During the 1990s, the firm made a series of acquisitions of other telecommunications firms that boosted its reported revenues from $154 million in 1990 to $39.2 billion in 2001 (Lyke and Jickling, 2002).
Tyco International was founded in 1960 and was regarded as an important electrical and electronic components provider, fire protection system maker and electronic security service provider. It is a diverse producing and serving corporation. Tyco has done business in over 1000 locations in 50 countries and hires 69,000 employees around the world (TYCO, 2012). Tyco International has expanded rapidly and broadly since its IPO in 1973 and has numerous companies among the Fortune 500. The firm’s revenue increased from $3.1 billion in 1992 to over $40 billion in 2004, with the firm’s market value estimated at over $100 billion (TYCO, 2012). Tyco has made numerous acquisitions, including 40 acquisitions since the 1980s.