Worldcom Scandal

Worldcom Scandal - Xavier Baquero 100126 Financial...

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Xavier Baquero 10-0126 Financial Statement Analysis Tuesday, May 10, 2011 Professor Shindell The WorldCom Inc. Scandal WorldCom Inc., the telecommunication company would originate from a small  Mississippi provider of long distance telephone service, to become the second  largest U.S. long distance carrier. The company did so, by making more than 60  acquisitions of other telecommunications firms, which gave the company a growth of  $39.2 billion in 2001, from only $154 million it had in the year 1990.  By purchasing  MCI, and later on UUNet, CompuServe, and America Online’s data network,  WorldCom manage to place itself among the leading operators of Internet  infrastructure. Business was doing well for a company characterized by rapid growth through  acquisitions, even though by 2000 its streak had ended. When WorldCom proposed  a $129 billion merger with Sprint Corp., that was blocked by federal and European  regulators. The motive behind the halt of the merger was given to competition  concerns within the telecommunications market. This merger was of great  importance to WorldCom, which had this plan in order to face  reduced demand,  since the dot–com boom had ended, accompanied by an economy that was entering  recession. As it was expected by top executives revenues would not meet  expectations, and the debt to finance the company’s expansion would remain high. In 
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consequence the stock market value of all telecommunications firms started to head  South, and the only escape WorldCom found was to ignore the GAAP and perform  illegal accounting practices to cover negative results. 
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This note was uploaded on 06/22/2011 for the course ALL 101 taught by Professor Laus during the Spring '11 term at FIU.

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Worldcom Scandal - Xavier Baquero 100126 Financial...

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