MCI CEO Flirts With Verizon As Earnings Fall On Weak Consumer Market - InformationWeek

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2/25/2005
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MCI CEO Flirts With Verizon As Earnings Fall On Weak Consumer Market

MCI posted earnings results for its fourth quarter and full-year ended December 31, 2004.

MCI Friday posted a $32 million loss for its fourth quarter, one day after receiving an updated acquisition bid from Qwest Communications International.

Qwest previously bid $8 billion to acquire MCI but was spurned last week in favor of a lower bid from Verizon Communications. Qwest sweetened the proposed deal in a letter to MCI's board Thursday with an offer that adds protection against a stock price dip of up to 10 percent.

For the quarter ended Dec. 31, MCI reported a loss of $32 million, or 10 cents per share, compared to earnings of $22.2 million for the fourth quarter of 2003, which included a gain related to its bankruptcy reorganization.

Revenue for the quarter dipped more than 10 percent to $4.97 billion, down from $5.54 billion the same quarter a year ago.

MCI, Ashburn, Virg., breaks down its revenue across three market segments - enterprise, commercial, and mass market - and most of the loss in revenue could be attributed to a 9 percent sequential loss in mass market earnings, due mainly to "a reduction of consumer market initiatives," said Michael Capellas, president and CEO of MCI, Ashburn, Va., during a conference call.

Compared to the third quarter 2004, MCI's enterprise market revenue increased 1 percent. Commercial market revenue was flat, and mass markets revenue was down 9 percent, according to MCI.

For 2004, MCI reported a loss of $3.89 billion, or $12.12 per share, compared to a profit of $22.21 billion in 2003. Results for 2003 were impacted by the company's emergence from bankruptcy.

Revenue for the year dropped to $20.69 billion, down from $24.27 billion in 2003.

Capellas talked up Verizon's pending acquisition bid for MCI, maintaining that the two companies would be a good fit.

"In Verizon we see a partner who compliments our product portfolio, positions us to deliver the advantage of a lower-cost network, and deliver on our next generation services," said Capellas. He added that "Verizon's financial resources and MCI's innovation" led the board to conclude that Verizon "is the right partner."

Capellas did not elaborate on Thursday's second round attempt by Qwest to outbid Verizon for MCI. He said only that MCI "acknowledged receipt of Qwest's proposal," and "will fully evaluate any new information."

Looking ahead, MCI issued guidance for revenues to $18 billion to $19 billion in 2005, representing a drop of 10 percent to 14 percent from 2004.

Shares of MCI traded down 28 cents at $22.53 Friday morning following the announcement.

Jennifer Follett contributed to this story.

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