Update: MCI posts profit, but revenue is down

Citing cost cuts, MCI Inc. posted a net income of $64 million for the second quarter of 2005, turning around net losses from a year ago and from the first quarter.

MCI's revenue of $4.7 billion for the quarter, which ended June 30, was down 10 percent from the second quarter of 2004. But the company, which is being acquired by Verizon Communications Inc., posted a net loss of $71 million for the second quarter of 2004 and of $2 million in the first quarter of 2005.

"We've been making progress toward our goals for 2005," said Michael Capellas, MCI president and chief executive officer, during a conference call to discuss the results. "First and foremost, MCI returned to profitability in the second quarter." The profit was the result of "ongoing cost discipline," a company restructuring in 2004, and other cost savings, he said.

The company is focusing on launching new products, improving customer service, and cutting costs, Capellas said in a statement. MCI's fastest growing product line is its private IP (Internet Protocol) services, and during the quarter, the company introduced two new services to its Secure Interworking Gateway (SIG) Services suite, which helps companies combine private and public IP networks, Capellas said during the call.

MCI, which emerged from bankruptcy in April 2004, attributed much of the second-quarter profit to operating expenses that decreased 11 percent from the second quarter of 2004. The company laid off about 34,500 employees between mid-2002 and mid-2004, and part of the decreasing expenses included smaller severance payouts, as well as cuts in administrative and sales expenses, the company said.

Operating income was $61 million in the second quarter, compared to operating income of $115 million in the first quarter of 2005 and $37 million in 2004's second quarter.

For the first half of 2005, MCI's revenue was $9.5 billion, down 11 percent from the first half of 2004. Net income for the first six months of 2005 was $62 million, compared to a net loss of $459 million in the first half of 2004. Merger-related expenses for the first half of 2005 totaled $29 million, severance expense was $40 million and reorganization costs were $16 million, for a total of $85 million.