While proclaiming that fighting poor perception by the press and Wall Street is the top job, John Sidgmore, WorldCom's newly crowned president and CEO, has a more pressing issue in pinpointing a solid strategy to keep the company out of Chapter 11 and reducing its massive debt.

“The most important thing will be to define growth options,” Sidgmore told analysts last week. “I believe there are still growth opportunities in this industry, [despite how] difficult it has been for all companies.”

Those growth opportunities had better be large, considering WorldCom's hovering $29 billion in bond debt. In a complete reversal from the acquisition-based strategy of former President and CEO Bernard Ebbers, the company is planning to evaluate its assets over the next 30 to 60 days and has indicated it will sell off those that don't have growth potential.

“We are going to deleverage the company as much as we can and lower our debt position as much as we can,” Sidgmore said.

Because of multiple downgrades on its debt from rating agencies and current pricing on its long-term commercial paper of less than 50¢ on the dollar, WorldCom's options are limited.

“They can't go to the capital markets. They can't do any acquisitions,” said Allan Tumolillo, chief operating officer at Probe Research. “They can't buy into anything because they have no ability to borrow. They have the chance to lose revenue and customers.”

WorldCom likely will be forced to cut its $4.9 billion in planned 2002 capital expenditures even further and construct only what is absolutely necessary. A pure maintenance-level plan would require about $2 billion.

But WorldCom executives are standing by their capex budgets, which break out as $4.5 billion for the WorldCom Group and $400 million for the MCI Group.

“We certainly don't see a situation where we should be going to a maintenance number of less than $2 billion [in] capex,” Scott Sullivan, executive vice president and chief financial officer at WorldCom, told analysts last week.

Indeed, it appears the company will lean toward assets sales as its preferred option of debt reduction. Sidgmore pointed to some non-core or under-performing assets, including some international companies that were acquired and some wireless technologies that may not be strategic to the company. The assets determined to be “not core growth” may be restructured or sold and will get far less capital going forward, Sidgmore said.

The carrier's new Neighborhood offering within the MCI Group, the UUNet business and investments in voice over IP likely will stay because of their strategic importance.

Analysts, however, say the provider should be focused on cash flow.

“Some of the biggest mistakes large companies like Lucent Technologies have made was selling off slow-growth businesses that just so happened to be cash cows,” said Michael Kennedy, managing partner at Network Strategy Partners. Kennedy believes the company should keep its long-distance assets and consider dumping its Internet assets. Assets such as the UUNet business, which makes up a good fraction of the company, would bring in enough money to pay off some of the debt, according to Kennedy.

Tumolillo believes the company needs to sell something valuable to make a meaningful dent in its debt load. “If you sell off the worthless assets, you only get a few bucks. You have to sell the crown jewel to get the money,” Tumolillo said.

Not everyone agrees, however. “UUNet is the future — it's where the market is headed,” said Nancy Kaplan, vice president of Adventis. “The MCI business is a cash cow, so they still need that.”

Instead of selling off business units, Frost & Sullivan analyst Rod Woodward suggests cutting the MCI dividend. “That could be put to good use somewhere else,” he said. Such a move certainly would anger shareholders that invested specifically in the dividend stock and likely would lead investors to further punish the tracking stock.

WorldCom also must be cognizant of competitors using its struggles as leverage with large customers.

“We are positioned to capitalize on the chaos in the industry,” said Dave Ryan, who was appointed chief operating officer of NTT America last week. The carrier is coming into the U.S. market with the backing of NTT of Japan and without the massive debt load of some competitors.“A lot of competitors have focused on acquisitions, and haven't taken the time to digest what they have and focus on what their customers are looking for. Many of these companies are collapsing because they are devoted more to their business plans, Wall Street and attracting investors rather than customer care.”

Ryan said NTT America has been able to poach some of the best sales people and management from companies like WorldCom. “It's clear to me that they have taken their eye off of what got them there,” he said.