WorldCom's federal future foggy

As the telecom giant formerly known as WorldCom Inc. struggles to reinvent itself with a new identity and a new reorganization plan filed April 14, analysts say the firm's position as a federal contractor is likely to remain strong — but not unchanged.

The company is now calling itself MCI, a name that it used to apply only to its consumer side. MCI is moving its corporate headquarters from Mississippi to Ashburn, Va., and announced April 14 that it has hired Robert Blakely as chief financial officer.

Blakely has held the CFO post at other firms, and recently completed a four-year appointment as a member of the Financial Accounting Standards Advisory Council, which advises the Financial Accounting Standards Board on issues relating to financial reporting and disclosure. The board is the designated private-sector body that develops standards of financial accounting and reporting, recognized as authoritative by the Securities and Exchange Commission.

The company has weathered a serious storm and had to throw some of its nonessential business functions overboard, said Warren Suss, president of Suss Consulting Inc., a firm specializing in federal telecommunications and information technology.

One key loss was MCI's systems integration capabilities, he said.

"On the one hand, it looks like WorldCom is going to come out of Chapter 11 with an incredibly strong balance sheet, so that they will not be burdened by the debt they were burdened with before," he said. "That means they will be able to be extremely aggressive in pricing future federal deals. They will be in a strong position to pick up business."

However, telecom companies now compete against systems integrators, not just other telecom firms, he said. "The question in my mind is have they lost the ability to expand the range of skills and services they provide. Can they go after opportunities that involve more than transmission on large federal networks? Many federal requirements are now going beyond transmission. I'm not sure WorldCom is in a position to take on those integrator roles."

However, telecom industry analyst Frank Dzubeck, president of Communications Network Architects Inc., said the systems integration arm is the only area where MCI won't be competitive.

"The competitive nature of the business is such that as long as they meet the financial requirements, they're a bidder as well as anybody else," he said. "They especially tend to be a strong player in the managed services space and they intend to be a wholesaler. They intend to be an end to end shop, but they're not in the integration business."