WorldCom started as a small long distance telephone service provider in 1983. In the 1990’s, companies were able to attain cheap and plentiful financing. This allowed them to quickly build transcontinental and transoceanic fiber optic networks. This allowed the company to grow financially and increase its customer base. In 1997, WorldCom merged with MCI Communications to become the second largest long distance telephone service behind AT&T. The merger of WorldCom and MCI was the largest corporate merger in US history at that time. Over the next six years, MCI WorldCom successfully acquired 65 other companies in order to expand their services and capabilities even more. Increasing its capacity helped keep WorldCom’s prices lower for its services, …show more content…
This resulted in the company mounting debt as high as $40 billion. There were also problems with the acquisitions, primarily managerial, in regards with the integration of new management from old and with consolidating systems and procedures. In the early part of 2000, the economy was entering a recession and it was causing problems across the nation. Due to the surplus in capacity of telecommunications and the over-projection of internet growth, the profits of WorldCom and other telecommunication companies started to fall. WorldCom was also forced to abandon a potential merger with Sprint Corporation due to antitrust concerns, which would have made MCI WorldCom larger than AT&T. Because of these problems, WorldCom’s aggressive growth strategy suffered serious setbacks. The company would continue to be inundated with troubles over the next few years. However, WorldCom seemed to continue to maintain its profitability even though the entire telecommunication sector was suffering massive …show more content…
She was viewed as strong-willed, intuitive and judgmental and professional. She was the head of the Internal Audits department and was a lead to 24 auditors and staffers. Her department mainly conducted operational audits, which measured the performance of WorldCom’s unit and ensuring spending controls were in place, but also did a little financial auditing. In March of 2002 the head of WorldCom’s wireless business sector, John Stupka, came to see her. He had specifically allocated $400 million in the third quarter of 2001 to offset shortfalls, and was about to lose it. This infuriated Mr. Stupka because now his division would most likely have to show a large loss next quarter. The money was to be used to cover losses from customers who didn’t pay their bills. It was a common occurrence and an accepted accounting practice. However, Scott Sullivan, WorldCom’s former chief financial officer and Ms. Cooper’s boss, had decided to move the $400 million from Mr. Stupka’s wireless division and use it to increase WorldCom’s income. Accounting firm Arthur Anderson was contracted to perform the bulk of the financial auditing for WorldCom. Mr. Stupka had already contacted two auditors of the Arthur Anderson firm and complained about the financial move, but both auditors sided with Mr. Sullivan. Both Ms. Cooper and Mr. Stupka felt it was an odd move, to not want to cover a loss with
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.
Bell and became the parent company of the Bell System. For most of its history,
AT&T’s roots stretches all the way back to 1875, when Alexander Graham Bell created the first telephone. The main reason AT&T was created was to exploit the creation of the telephone. AT&T became a parent company to the Bell system, which was a phone company monopoly. They created a long distance telephone network that went from New York to Chicago and then on to San Francisco. Then in 1984 AT&T split into eight different phone companies. They built out to Denver in 1899 and then they hit a rough patch, the signal wasn’t too strong. Luckily, AT&T created the first practical electrical amplifier in 1913. And this made transcontinental communication possible. Bell’s patent expired in 1894 and only Bell telephone could only legally operate in the U.S. The number of telephones grew as phone wires spread across the nation, there where about 3,317,000 phones. The only downside to this early story is that, only phones with the same phone company could contact each other, this was being fixed in 1913. In 1925 there was a new president, Walter Gifford, he sold International Western Electrical Company to the ITT for 33 million to make AT&T universal. In January 1, 1984 was changed and revitalized, it no longer was the bell system. It had a new global icon, as you see today. IN 1984 AT&T carried around 37.5 million calls a day. CEO, Robert Allen, announced that on Septemb...
Gary Winnick founded Global Crossing in 1997, observing the surge in telecommunications of the 1990’s and utilising it to construct the largest fibre optic network in the world for the purposes of transmission of voice, text, video and other data between 27 countries. The Company went public in 1997, with Winnick maintaining hold of 27% of stock in the company valued at $1.4 billion, and a year later held a market value of £38 billion surpassing Ford Motors. Winnick employed the services of Salomon Smith Barney, who employed an analyst with unprecedented level sof influence of the telecoms industry, Jack Grubman. After a year of low revenues and lackluster of cash flow, Winnick sought to emulate WorldCom with its acquisition based business model. Hiring former AT&T executive Robert Annunziata as a new to lend credence to his company’s respectability he entered into negotiations to purchase long distance provider Frontier for $11.2 billion, followed in the next quarter by the announcement of a deal of $37 billion to buy US West which ultimately fell through after losing out to Qwest. The acquisitions were meant to provide cash flow and raise the awareness and respectability of Global Crossing, allowing Winnick’s stake in Global crossing to grow in excess of $4.5 billion. In 1999 Winnick abandoned his previous plan to raise capital for the company piecemeal and moved to fund the fibre network at once utilising junk bond sales set up by Jimmy Lee of JP Morgan Chase. Winnick not only benefitted as a shareholder, but also banked fees through his holding company and its subsidiaries for example 2% of the gross revenues of Global Crossing was paid in return for a long term consultancy deal with PCG Telecoms a subsidiary of Winnick’s Paci...
The auditors were more concerned with keeping the WorldCom account and should have been unbiased and independent in their decisions. Andersen even undercharged WorldCom as he looked at is as a bond in their long term relationship. Andersen’s “more efficient” method of auditing after WorldCom’s operation expansion skipped detailed individual transactions for
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.
Effective competition is widely seen as a key to the development of telecommunications services. The ability of new telecommunications networks to interconnect fairly and efficiently with existing networks is critical to the development of competition. AT&T has undergone numerous changes since its inception in the late 19th century. The McKinsey 7 S framework as applied by Pascale is recommended to manage the changes they are facing to adopt a greater competitive presence in the global economy. In conjunction with this framework, numerous other models were applied to analyse the global competitive position of AT&T. Recommendations for a revised strategy and direction for AT&T have been made throughout this document including two scenarios of how the telecommunications industry might develop towards 2000, while outlining the impact on AT&T.
...ent expense the year it incurred. Due to the reporting error, in 2001 $3.055 billion was misclassified and 4791 million in the first quarter of 2002 (Law Maryland). In order to avoid getting caught, WorldCom was trying to be slick by leaving some line costs as current expense so that the error in classifying would not be easily detectible. This error in classifying expenses cause WorldCom to increase net income and assets. This fraud was found by the companies internal audit, Cynthia cooper, on May 2002. This detection was not good news to Arthur Anderson as they were the outside auditors of WorldCom. Anderson had already been affected by Enron scandal and neglecting to do to their job correctly. But with WorldCom they claimed that the chief financial officer Scott Sullivan did not tell them about the line costs being capitalized and they were unaware of this fact.
Competitive Analysis of Motorola Company Background Motorola, Inc. is a Fortune 100 global communications leader that provides seamless mobility products and solutions across broadband, embedded systems and wireless networks. Motorola was founded in 1928 by Paul and Joseph Galvin under the name Galvin Manufacturing Corporation. The company started out by producing battery eliminators that allowed battery operated radios to run on household current. The first Motorola brand car radio was launched in the 1930aê¡?s. In 1947 the company changed its name and became Motorola, Inc.
would let them in on the corruption that when on. The firm had a tight control
The Internet boom of the 1990’s gave rise to the popularity of America Online AOL and Time Warner saw themselves at a crossroads where old and new media would become one. The histories of both AOL and Time Warner are extensive and have not always been successful. Time Warner itself was created by two mega-mergers. The first merger was in 1989 between Time Inc., publisher of many magazines such as Time Magazine, and Warner Communications. Both companies have histories stretching as far back as 75 years or so. In 1996, this company merged with Turner Broadcasting, which brought CNN with its founder Ted Turner. These two mergers created a company ready to lead in any form of media. The company launched the HBO television network. Time Warner, headquartered in New York, had $27.3 billion in revenues in 1999 and a market value of $112.6 billion. On the other side of the merger there is new media giant AOL, today the biggest, richest, and most successful internet company in the world. It was founded in 1985 as Quantum Computer Services and by 1994, after changing its name, had a million subscribers. In its early years, it almost fell because of the problems associated with introducing unlimited access for a fixed monthly fee. As its number of users increased, so did its capacity problems, which made many customers angry because they could not get a connection. The problem was solved when AOL made a deal with MCI WorldCom, which led merge with its rival CompuServe.
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)
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).
Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’ roles grew more important. The auditors’ job became more difficult as the accounting principles changed. It also became easier with the use of internal controls, which introduced the need for testing, not a complete audit. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. Computers played an important role of changing the way audits were performed and also brought along some difficulties.
The Tyco accounting scandal is an ideal illustration of how individuals who hold key positions in an organization are able to manipulate accounting practices and financial reports for personal gain. The few key individuals involved in the Tyco Scandal (CEO Kozlowski and CFO Swartz), used a number of clever and unique tactics in order to accomplish what they did; including spring loading, manipulating their ‘key-employee loan’ program, and multiple ‘hush money’ payouts.