WorldCom’s New Chief Facing a Major Challenge

John W. Sidgmore, the new president and chief executive of troubled WorldCom Inc., made his reputation in the telecommunications industry as a deal-maker--not a fixer.

Over the last three decades, the 51-year-old executive has built up several small companies in the information networking business. His crowning achievement was transforming UUNet Technologies Inc. into a multibillion-dollar company, and ultimately one of the most valuable assets of WorldCom.

But the challenge Sidgmore faces now is whether he can repair a corporate behemoth as broken as WorldCom. Even Sidgmore acknowledges the enormity of the task.

“I am not saying I will single-handedly turn things around,” he said Tuesday during a conference call with telecommunications analysts.

He declined to discuss his strategy further, saying simply that he would evaluate WorldCom’s strategic alternatives over the next two months.

The executive denied the public rumblings that WorldCom was on the selling block.

“We’re not going to rule anything out, but I was not installed in this company to sell it,” he said.

Such verbal broad strokes, though, have failed to inspire many votes of confidence among Wall Street watchers.

“He doesn’t have a very clear view of the company,” said F. Drake Johnstone, a telecom analyst with Davenport & Co. in Richmond, Va. “They would have been better off to bring in an outside CEO. If they’re going with [Sidgmore], he’s got to show that he’s going to make serious moves seriously fast.”

Sidgmore, whom his peers and friends describe as someone who typically avoids risks, now finds himself taking on one of the biggest gambles of his professional life.

He was one of the earliest executives to spot the potential of the Internet, and helped build the infrastructure of the information superhighway when he took over UUNet in 1994--well before the dot-com craze. At the time, UUNet was a small company with just $6 million in revenue.

UUNet was acquired for $2 billion by MFS Communications Co. in 1996, and later merged into WorldCom.

“Many people see him as a visionary,” said Tim Donovan, spokesman for Zhone Inc., an Oakland-based networking company that has Sidgmore on its board.

“But I don’t envy the position he’s in. It’s one thing to turn around a company that’s suffering from an industrywide slump. It’s another thing to have your entire financial situation under scrutiny.”

Indeed, WorldCom has suffered along with the rest of the telecommunications industry as sky-high expectations of increased demand for data and voice networks have failed to materialize.

Yet the immediate concern is that WorldCom’s debt securities will be reduced to junk-bond status by rating firms Standard & Poor’s and Moody’s Investors Service, both of which are reviewing the company’s status.

Reducing the ratings to junk would kick in provisions forcing the firm to repay $2 billion in loans within 90 days, said Patrick Comack, a telecommunications analyst with Guzman & Co.

That would wipe out the company’s $2 billion in cash on hand and make it difficult to refinance debts over the next few years, he said.

“A lot of people are working under the belief that WorldCom is a doomed company,” Comack said. “His job is to ensure that WorldCom is a viable company going forward. But I’m not sure that that’s the way the market’s evolving.”

One crucial problem is a dwindling revenue stream. Competition from domestic carriers--particularly wireless companies offering one-rate plans for long-distance calling--is eating away at WorldCom’s core telecom market.

What markets Sidgmore could push WorldCom into to help bolster its bottom line is unclear. But analysts note that Sidgmore recently has expressed enthusiasm for voice-recognition, voice-activation and browser technologies--spurred by rapid advances in recent months--and for the wireless market.

Tuesday, Sidgmore defended the company against investor bondholder fears and Wall Street doubts.

“The company has a more negative face and look than it deserves,” he said.

With questions about loans made to former CEO Bernard J. Ebbers and a federal investigation of its accounting practices, “the press, Wall Street and everybody has a much more negative view [than is warranted],” Sidgmore said.

But WorldCom should not expect a corporate white knight to save the company by buying it, Johnstone said.

“The issues facing WorldCom right now are too huge,” telecom analyst Johnstone said. “At the very least, I doubt someone would want to come in and assume $30 billion in debt. Who would want to do that?”

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Times staff writers Elizabeth Douglass and James S. Granelli contributed to this report.