Update: MCI reports $3.4B loss but says it's back on track

MCI Inc. reported a $3.4 billion third-quarter loss on Thursday, due mainly to a write-off of the value of its assets, as the company's efforts to recover from its bankruptcy were hampered by stiff competition in the long-distance telephone service market.

As the company had warned last month, it took a $3.5 billion noncash charge. The Ashburn, Virginia, company emerged from bankruptcy in April and changed its legal company name to MCI from WorldCom Inc.

The $3.4 billion loss for the quarter ended Sept. 30 compares to a loss of $55 million in the third quarter 2003, it said. Net loss for the quarter totaled $10.65 per share, it said. MCI didn't report a per-share figure for 2003's third quarter because the company was in bankruptcy at the time and its shares were not being traded.

Analysts surveyed by Thomson First Call predicted third-quarter earnings of $0.04 per share.

The telecommunications company reported revenue of $5.1 billion, a decline of 15 percent from the same period last year when it reported revenue of $6 billion.

Nevertheless, MCI said that its cost reduction initiatives are working and that revenues are stabilizing in key business segments. An emphasis on operational execution had produced solid improvements in the third quarter, it said.

The company said its future focus would be on delivering new products and services that use IP (Internet Protocol) technology and continuing its cost-cutting program.

"Pricing is starting to stabilize, quite frankly because there was such severe write-downs last year," Michael Capellas, MCI president and chief executive officer, said in a conference call Thursday. "Secondarily, the take-up of new technology is starting to hit the enterprise space first."

Capellas added that MCI will concentrate on selling Internet, phone and network security services to large corporate customers, while stepping back from residential phone services as prices drop.

"We are not haphazardly exiting markets. We are systemically trying to back off new customer acquisition. How fast the decline comes is a very difficult question to answer," Capellas said.

Sales in the division that serves global corporate customers fell 8 percent to $1.2 billion in the third quarter, while revenue in the division that sells services for homes and U.S. small businesses fell 17 percent to $2.2 billion, MCI said.

MCI's international and wholesale division also fell by 17 percent year-over-year, posting revenue of $1.6 billion.