Examining a Business Failure

LDR 531

May 16, 2011

Mary McDonald

Abstract

In 1983, the company that would become WorldCom started in a small town in Mississippi. Twenty years, billions of dollars, and numerous mergers and acquisitions later, WorldCom filed for bankruptcy protection after a large scale accounting scandal was discovered and the CEO, Bernie Ebbers, drove the company in a tailspin. His unethical business dealings led to over 5100 people losing their jobs, untold people losing money invested with the company as their stock became worthless, and a 25-year prison sentence for Ebbers himself.

Introduction

Bernie Ebbers started out in the telecommunications industry in 1985 by becoming the CEO for a company known as LDDS, which provided long distance services in the area around Hattiesburg, Mississippi. Over the years, the company grew through a series of business deals in which they acquired other telecommunication companies. In 1995, the name of the company was changed from LDDS to WorldCom. Ebbers purchased MCI in 1998 for the amount of $37 billion dollars. With the purchase of the MCI, WorldCom became a telecommunications giant. The corporation seemed to be a great success story of the 1990s because of how well the company was doing financially and with the job opportunities that the company had to offer.

WorldCom wanted to become the strongest company in the industry. Their plan to do this included attempting to purchase Sprint Corp for $129 billion dollars in 1999. The sale was blocked, however, by regulators who felt that it would make WorldCom a monopoly in the telecommunications industry. This severely weakened the company's position in the industry. In 2000, the telecommunications industry entered a downturn. This, combined with the failed acquisition of Sprint and the accounting scandals, led to WorldCom filing the largest bankruptcy in history on July 21, 2002. At the time of the filing, WorldCom was saddled with over $41 billion in debt and more than $107...