Posted on: Tuesday, December 3, 2002

WorldCom rescuer quietly takes charge

By Barbara Powell
Associated Press

JACKSON, Miss. — WorldCom Inc.'s new chairman and CEO, Michael Capellas, quietly slipped into his new role yesterday.

Capellas, who has chosen to work out of WorldCom's Asburn, Va., office instead of the company's Clinton, Miss., headquarters, granted no interviews, and aides refused to discuss the agenda for his first day heading the bankrupt telecommunications giant.

Capellas is expected to spend several weeks burrowing into the company's corporate culture before making any bold public pronouncements. When he announced several weeks ago that he was leaving the No. 2 job at Hewlett Packard Co. to head WorldCom, he said he would lead it out of bankruptcy without a clean sweep of management, breaking up the company or losing major corporate accounts.

"I think for the next few weeks he will be measuring the mettle of his lieutenants, putting together his slate of board candidates, and in his spare time learning the business," said Frank Dzubeck, a telecom strategy consultant and head of Communications Network Architects in Washington.

Capellas will be under pressure to find a way to cut costs so WorldCom — which has admitted to more than $9 billion in accounting fraud — can find a way to become profitable and emerge from the biggest bankruptcy ever filed.

"I don't see major changes over the next several weeks. But just shoring up the business and stemming the flow of customers away from MCI would be a major contribution," said F. Drake Johnstone, a telecom analyst with Davenport & Co. in Richmond, Va.

Capellas' freedom to impose his own strategic plan on WorldCom became even more limited last week. Already under the eye of two federal judges and its creditors, WorldCom agreed to a partial settlement of fraud charges with the Securities and Exchange Commission that gives greater oversight powers to court-appointed monitor Richard Breeden.

"This is the worst management nightmare that any new CEO has ever faced, but he's bobbing and weaving between these enormous power blocs, and he's showing great leadership," said Jeff Sonnenfield, associate dean at Yale University School of Management and head of its Chief Executive Leadership Institute.