MCI expected to slash up to 3,000 jobs in restructuring

July 29, 1995|By Bloomberg Business News

WASHINGTON -- MCI Communications Corp. is expected to cut as many as 3,000 jobs, or 7 percent of its work force, as part of a restructuring and management shuffle it will unveil next week, analysts said.

MCI, the No. 2 U.S. long-distance telephone company, is expected to outline a plan that would reduce costs in an effort to boost profitability, they said. As of Dec. 31, MCI had 40,667 employees. Analysts said they expect MCI to take a charge for the plan, although they didn't know the amount.

Analysts said the company also will make some management changes next week, although details weren't immediately available.

A restructuring would come at a critical time for MCI, which is trying to tap new businesses and markets to spur revenue and earnings growth. In January 1994, MCI said it would invest $20 billion to offer new services such as local phone, cellular and paging.

"MCI is likely to announce management and structural changes next Wednesday," said George Reed-Dellinger, an analyst at NatWest Securities Corp.

"Downsizing 3,000 employees . . . would result in savings on the order of" 13 cents a share a year, he said.

MCI declined to comment. The company hasn't yet disclosed its second-quarter earnings, which it usually does in the third week of July. It is expected to report its results Wednesday.

The company is expected to post earnings of 38 cents a share, based on the average estimate of 21 analysts surveyed by Zacks Investment Research.

A year ago, MCI had net income of $215 million, or 37 cents a share, on revenue of $3.31 billion.

Yesterday MCI shares rose $1.375, or 6.1 percent, to $24.

Volume was 4.52 million shares, more than its average daily volume of 3.02 million.

MCI is eager to branch into new businesses.

It has said it expects half of its revenue in five years to come from products and services it doesn't provide today.

Analysts also expect MCI next week to announce an agreement with at least one regional Bell company and possibly GTE Corp. to resell cellular services.

MCI has fallen behind rivals AT&T Corp. and Sprint Corp. in the burgeoning cellular business, which is adding 28,000 customers day.

AT&T, the No. 1 U.S. long-distance company, and Sprint, the No. 3 carrier, are both established in the wireless arena.

AT&T, through its $11.5 billion acquisition of McCaw Cellular, has 4.7 million cellular customers. Sprint has 1.24 million cellular customers.

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