Uh oh, Worldcom is in *BIG* trouble now...

[Mavrick007]

It's not like they can misplace $4 billion dollars. It's that they mis-accounted their expenses as a capital expenditure.
They basically accounted their operating expenses as an investment so that they didn't have to pay as much tax and so that it looked like they made more but in fact they lost money, big time.

Anyone could make this mistake right?
But even a first year business major could tell that you don't amortize expenses over many years as an investment.
They are normal operating expenses.

Heh Heads are gonna roll!

 

[Vette73]

Originally posted by: Electric Amish
My sister works for them.

amish

You mean your sister USED to work for Worldcom before this Friday, when they pass out 17000!!! pink slips.

 

[Miramonti]

Originally posted by: freegeeks
the only positive thing about this mess is that the euro is quickly gaining on the dollar, it makes my SF - Oregon trip in 3 weeks more affordable

You pig, exploiting this tragedy for your own personal gain.

 

[Ramsnake]

Originally posted by: Mavrick007
It's not like they can misplace $4 billion dollars. It's that they mis-accounted their expenses as a capital expenditure.
They basically accounted their operating expenses as an investment so that they didn't have to pay as much tax and so that it looked like they made more but in fact they lost money, big time.

Anyone could make this mistake right?
But even a first year business major could tell that you don't amortize expenses over many years as an investment.
They are normal operating expenses.

Heh Heads are gonna roll!

thanks for the post, cleared up some things ,thats what i had in mind too.... the loss of 50 billion dollars posted by AOL-TW was also due to kinda similiar superficial accounting where you are expected to earn 50 billion in the next fiscal year but didnt so you had a 50 billion loss in the fiscal year
...wasnt it?

 

[Stevem627]

Having worked for WorldCom until a few months ago, I can tell you this is just the tip of the iceberg. They always tried to make acquisitions to hide issues like this and then they hit the wall. There were millions owed in credits to customers that were being put off just in my little office in Albuquerque. The credits were incorrect billing. They'd charge people say $25,000 or $200,000 a month and just put off giving the credit back. Once it was "billed" it was hard to get off the books. I'm sure there are billions of dollars like this sitting out there too. It was the reason I left, since every client I had was starting to hate WorldCom. Service was great, but "billing issues" were way out of line. This is VERY common in the industry overall. In the past there was enough revenue to handle and hide these write offs but once they start tanking like this is will all surface.

All this is manipulated to inflate stock prices. It goes on daily in all businesses. Stocks and their values are just a game.

 

[randomlinh]

and this is the example of when the company loses at the game...

 

[Nemesis77]

Originally posted by: Ramsnake
thanks for the post, cleared up some things ,thats what i had in mind too.... the loss of 50 billion dollars posted by AOL-TW was also due to kinda similiar superficial accounting where you are expected to earn 50 billion in the next fiscal year but didnt so you had a 50 billion loss in the fiscal year
...wasnt it?

Disclaimer: IANAL

To my knowledge, the loss AOL-TW posted was because when the companies merged, AOL was valued as being worth X dollars. As the stock fell, the value of AOL dropped to X - Y dollars. So AOL-TW has to report that Y as a loss. They didn't really lose any money as such.

 

[XFreebie]

hurray for pro forma! do all sorts of whacky things! never goto jail!

maybe this time some worldcom execs will goto jail, unlike enron. but then again, wouldn't u spend a few years
i mean it is free room and board, cept the food is... prison food but otherwise, still worth the tens of millions u reap while the lowly white collar workers under u suffer.

 

[flavio]

I just heard that their stock is trading at 83 cents this morning, could have made some money if I bought at 10 cents eh?

 

[csiro]

That 83 cents is just the old closing pricing, before the whole accounting annoucement. The stock isn't worth anything now..

 

[Pepsei]

yea. the stock has been delisted it appears... or the trading has stopped

so they're not really worth anything.

 

[Miramonti]

The last I heard (yesterday) was that it was between .10-.20 on the instinet trading system. Nasdaq has "halted" its trading until worldcom answers its questions and gives more specifics. It could be halted for a day or even a month depending on how long it takes.

I tried to buy it yesterday morning at $.09 when it was trading .10 but I realized I couldn't because it wasn't 8am yet. Then at 7:52 nasdaq halted the stock so it never was a possibility.

/edit - it won't get delisted until it files for bankruptcy, which then the stock symbol will become WCOMQ.b, the be for noting its traded over the counter as a 'bulletin board' stock. (In this case its still available through datek and other brokerages tho)

 

[SagaLore]

Originally posted by: Harvey
It seems to be a freaking disease running rampant amongst the accounting firms, the major stock brokerages and the big time cash floaters. PBS had a scathing expose about it, the other night.

I wonder if Martha Stewart dumped her WorldCom stock, yesterday?

I'm an IT guy for a large accounting firm in PA, I believe we're honest. At least the offices I support are.

 

[AU Tiger]

My brother in law is a regional sales manager for their corporate customers. Two weeks ago he had the unpleasant task of generating a list of employees to be laid off in his area for his boss. Hopefully his boss doesn't have his name on a similar list.

 

[shazbot]

if they did it right, they coulda gotten some nice tax breaks. man, all this is making me rethink about going into corporate finance =\. but hell, this market is a shorts dream. just pick any high tech/telecom company, and you're bound to make a killing.

 

[alphatarget1]

some big telecom corporations will probably use this chance to take over worldcom (merger)

 

[Lalakai]

Of concern to me is the timing of these company failures/disclosures. Were these practices being applied during Clinton, or did they become common after Bush took office??? It's fairly common knowledge that the GOP favors big business, so were they given a green light while regulators were recommended to look the other way????

And yes, I did vote for Bush (voted both times for Clinton too); don't know if I'ld support Bush today though

 

[Goosemaster]

Well they said to expect more "Enrons" and here we see round 3 (or is it round 2? I don't know, I don't do rounds).

WorldCom has nearly 100,000 employees and they just layed off 17,000 with more to come I'm sure.

WorldCom = MCI and also UUNet. UUNet is one of the largest ISPs and many national and local ISPs are UUNet resellers. This could get ugly.

What will happen? Some suits will go to golf course "prison", the company may fall, those 100,000 employees may be collecting unemployment soon, faith in the stock market is once again shattered.

Who thinks Bush, as he did after Enron, will maintain the "we need to go slow on reform" rhetoric?

My domain name is at Netsol...whose ceo ate a chicken pastrami sandwhich for lunch because his secretary ate his blt because she was tired of waiting for the copiers which were broke because the repairman did not come because the worldcup was on and because he is a lazy bastard and will not come to work NEtsol whose line are run by..


MCI/UUNET

 

[Pepsei]

i stand corrected....

the symbol is showing white in our ILX quotes window... normally it would be either red or green.

 

[JellyBaby]

Were these practices being applied during Clinton, or did they become common after Bush took office

Yes, Clinton's immorality taught the CEOs they too could be immoral. Everyone wanted to be Clinton: immoral, above the law, powerful.

The SEC was very quick to freeze WorldCom's arsesets so none of their elite could make a quick killing and bail to the Amazon.

 

[apoppin]

Originally posted by: spankyOO7

and said it plans to lay off 17,000 workers beginning on Friday

oh crap!!! :Q

Does this mean the MCI telemarketers will stop calling my home twice a day?

You think they'd just save even more money by just firing the top 170 executives, instead.

 

[Mill]

Damn I own worldcom. Several thousand bucks worth. I called my broker yesterday and I hope he was able to sell it before it was halted. Does anyone know what time it was halted?

 

[JellyBaby]

Does this mean the MCI telemarketers will stop calling my home twice a day?

Probably the opposite as they may need to make some quick bucks now.

Looks like the DOW is "rallying" again. One wonders if that's due to the top 75 investor fatcats who own half of all stocks...or if it's the collective might of the humble everyday middle class investor?

 

[FoBoT]

Originally posted by: Millenium
Damn I own worldcom. Several thousand bucks worth. I called my broker yesterday and I hope he was able to sell it before it was halted. Does anyone know what time it was halted?

i don't know what time, but the news last night said they stopped it at $0.23 a share, so i don't think you own several thousand bucks worth anymore, sorry dude

 

[Miramonti]

Originally posted by: Millenium
Damn I own worldcom. Several thousand bucks worth. I called my broker yesterday and I hope he was able to sell it before it was halted. Does anyone know what time it was halted?

7:52am yesterday morning, before the 'official' nasdaq opening. It was trading at $.10 at the time. So now if you liquidate, you can pay off your mci long distance phone bill with it, but thats about it.

I'd guess Wordcom execs are going to try to make some statements to attempt to restore some confidence that they may not file chapter 11 immediately (although they won't say that directly), and the stock will rally some (not much tho). They will file chapter 11 tho and then it will crash again.