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Biography of Bernie Ebbers

Name: Bernie Ebbers
Bith Date: 1941
Death Date:
Place of Birth: Edmonton, Alberta, Canada
Nationality: American
Gender: Male
Occupations: business leader
Bernie Ebbers

Through a series of increasingly audacious business acquisitions, Bernie Ebbers (born 1941) built a once-small business into a global communications powerhouse. An enigmatic person, the laid-back and private Ebbers masterminded some of the largest, headline-grabbing takeovers in business history.

Technological innovations like cellular phones, fiber optics, and the Internet have led to a sea change in the telecommunications industry. As the battle among a handful of competing firms becomes more pitched, Bernie Ebbers emerged as a force. In a series of acquisitions, Ebbers built his original company, LLDS, into MCI WorldCom, the second largest telecommunications company in the world with 22 million customers and over $34 billion in revenue. In October 1999, he announced a merger with Sprint Corp. that would create a company with revenues of $54 billion and 42 million customers.

Humble Roots

Born in Edmonton, Alberta, Canada in 1941, Bernie Ebbers comes from a working-class family. An intensely private man, little is known about his past. After high school, he got a job as a milkman, but tired of the drudgery and the 30-below-zero weather. It did not take him long to find something else to do.

Apparently, the 6-foot, 4-inch Ebbers played basketball in high school. He escaped the cold weather by accepting a basketball scholarship at Mississippi College, a tiny Southern Baptist school in Clinton, Mississippi. He graduated in 1967 with a bachelor's degree in physical education. Ebbers has lived in Mississippi ever since.

Although a bench-warmer on the team, the college had a profound effect on Ebbers' spirituality. In 1996, he wrote in the alumni magazine, "I came to have a fuller understanding of what my purpose was in life, what a personal relationship with Jesus Christ really meant, and how I would try to live my life from that point on." Crediting God for his success, Ebbers teaches Sunday school at his church.

After college, Ebbers held a number of jobs. He was a high school physical education teacher and basketball coach, then managed a garment warehouse. At one point, he was even a bouncer. Things began looking up in 1974, when he bought a motel in Colonel, Mississippi. After bringing in some investors, Ebbers was able to buy another in 1976. Eventually, he had a chain of nine Best Western motels. Although successful, the hotel business did not generate much cash.

Entered the Telecommunications Industry

When the federal government announced the forced divestiture of AT&T in 1982, many small companies leapt at the chance to enter the growing telecommunications industry. Ebbers had absolutely no experience in the long distance business, but jumped in on a small scale in 1983 when he and three friends borrowed $500,000 and bought a struggling phone company. With help from a waitress at their favorite coffee shop in Hattiesburg, Mississippi, they named it Long Distance Discount Service (LDDS). Initially, LDDS did not fare better under new management. The investors asked Ebbers to take over. He became CEO in 1985. Within six months, Ebbers had turned LDDS into a profitable venture.

In November 1983, LDDS was certified as a long distance carrier. Its first customer was the University of Southern Mississippi. Ebbers and the others were not willing to wait for growth. They embarked on an acquisition spree that followed Ebbers' philosophy of fast growth through acquisition. With each purchase, LDDS expanded operations from its small town base. The company went public in August 1989 through the purchase of Advantage Companies, Inc. This move allowed LDDS to provide long distance services to 11 Southern and Midwestern states.

Ebbers mapped a business strategy focused on providing corporations with a complete communications service. On the outside, it may have looked like Ebbers and LDDS were buying companies willy-nilly, but they acquired communications networks built with high-capacity fiber-optic cable and quickly expanded their service area. Each deal cut overhead of the combined company, thus saving money and increasing value.

In the early 1990s, Ebbers engineered the acquisition of several companies that would set the stage for the company's leap to national prominence. From 1992 to 1995, LDDS (renamed WorldCom in May 1995) bought corporations that expanded its service capabilities. Ebbers acquired Williams Telecommunications Group (WilTel) for $2.5 billion in 1995. The purchase brought into the WorldCom fold 10,000 miles of fiber and 1,000 miles of microwave transmission facilities. Now WorldCom could serve even the largest companies with both voice and advanced data communications systems. Two years later, the company could claim the position as fourth largest long-distance carrier.

A Global Leader

Ebbers grew WorldCom into one of the largest communications providers in the world, but he retained his small-town roots. A self-professed "country boy," he enjoys wearing faded blue jeans and cowboy boots over expensive suits and takes cabs when he could be riding in chauffeured limousines. He downplayed his role in the company's success, although he was the driving force behind the acquisitions.

In 1996, Ebbers orchestrated the $12.5 billion purchase of MFS Communications that gave WorldCom a truly global network. A hidden gem in the deal was that it included UUNet Technologies, which MFS had previously acquired, a leading Internet services company. With these moves, the world began paying attention to Ebbers, who was building a worldwide communications network to serve his business customers.

The publicity surrounding the MFS deal did not change Ebbers. He still ran his company out of Jackson, Mississippi, and listened to Willie Nelson songs, even though his piece of WorldCom was worth $560 million in 1997. Ebbers did, however, force Wall Street to stand up and take notice. Analysts backed his moves with enthusiasm, which helped him continue his spending spree, because he bought companies with a mix of stock transactions and cash. Wall Street's faith in Ebbers kept WorldCom's stock price high and increased the value of the companies he bought. Through most of the 1990s, WorldCom stock rose 50 percent annually.

The vibrant economy of the late 1990s led to a wave of mergers and acquisitions in industries worldwide. The telecommunications sector, formerly a regulated monopoly before being dismantled by the federal government in 1984, has undergone a period of consolidation that guarantees to leave only a few multinational corporations controlling the entire industry. The Internet and wireless communications have had a profound impact on the communications sector and forced companies to grow or be eaten alive by a competitor.

Ebbers and WorldCom orchestrated three multi-billion dollar deals in 1998. The largest of these was a proposed merger with MCI Communications in 1997 for approximately $40 billion, at the time the largest merger in business history. In fact, Ebbers' bid for MCI was a daring move and completely destroyed British Telecommunications' takeover bid of $18 million. The MCI bid shocked most observers in the business world. When the offer was made, MCI was four times the size of WorldCom. Many people wondered how the number four corporation could buy the number two. The move only enhanced Ebbers' public personae as a "Swashbuckling Dealmaker" who will move quickly to close deals. His record of more than 65 mergers and acquisitions since 1983 further added to his legend. Reportedly, he named his boat "Aqua-sition."

The two companies completed the merger a year later, forming MCI WorldCom. Size and prestige, however, were not the reasons Ebbers acquired MCI. WorldCom executives saw two distinct strategic values. First, the power and efficiency of the merged company would be greater than the two working independently. Second, the companies had corresponding strengths and assets. Ebbers predicted that the merger would cut more than $2.5 billion a year in combined costs.

Ebbers built his corporation around servicing business customers. The MCI deal gave WorldCom control of 60 percent of all U.S. lines to the Internet, in essence, becoming the world's leading provider of Internet services. The company continues growing in size and scale to compete directly with industry leader, AT&T and the regional Baby Bells.

Country Boy Turned Business Magnate

In October 1999, Ebbers made another startling announcement: MCI WorldCom would purchase Sprint Corp. for a remarkable $129 billion. The merger will make WorldCom (as the new company will be named), only slightly smaller than industry leading AT&T. 1999 estimates predict that AT&T will reach nearly $62 billion in revenue, while the combined Sprint and MCI WorldCom would top $54 billion. WorldCom's market capitalization of more than $200 billion would outdistance AT&T's $133 billion.

Amusingly, Sprint CEO Bill Esrey was riding his horse in the middle of Colorado when he and Ebbers agreed to the deal. They reached an agreement via a wireless phone system that works via satellite. Also an outdoorsman, Ebbers is known to raise cattle and do his own chores on a ranch near WorldCom headquarters. In 1998, The Wall Street Journal reported that Ebbers bought a 164,000-acre ranch with 20,000 head of cattle 120 miles northeast of Vancouver, British Columbia.

Clearly, Ebbers expected to battle AT&T for the top spot well into the 21st century. The Sprint acquisition gave Ebbers an entry into wireless communications and a stronger base of residential customers. Ebbers' strategy was clear: his company would still cater to the business consumer, providing every available means of communication services, from voice to Internet access and wireless and international calling. Essentially, Ebbers would be able to offer this lucrative market a one-stop package fulfilling all a customer's needs.

As with the MCI merger, the Sprint deal allowed Ebbers to offer a wider array of services and cut overhead costs dramatically. Operating cost savings were expected to hit $3 billion when the two were fully integrated. Especially attractive to Ebbers was Sprint's wireless/cellular business, Sprint PCS, which added more than two million customers in 1999 alone. WorldCom was also excited about gaining direct access to millions of residential customers. The company was developing technology that will give home users high-speed connections through fiber optic lines, permitting them to be connected to cable, phone, fax, and the Internet on one line.

There are a variety of risks associated with two mergers of this size, particularly integrating the corporate cultures of all three. There are also questions about merging technologies. For his part, Ebbers downplayed the differences.

Over the years, Ebbers was skilled in retaining the entrepreneurial spirit of the companies he's acquired and keeping employees happy. As WorldCom continued growing, this task become more challenging. His low-key personality and frugal practices permeated the company. Ebbers told Fortune's Nelson D. Schwartz, "I look at every single line item on the budget, it's an arduous process...they had their entourages and limos, but I always take a cab."

Ebbers was committed to increasing shareholder value, the CEO buzzword of the 1990s, thus the cost-cutting methods. In turn, he was rewarded for his success. Ebbers made nearly $25 million in bonuses in 1997 and 1998. Forbes magazine estimates Ebbers' fortune at $1.4 billion, making him one of the 400 wealthiest Americans.

Ebbers was considered one of the most important business leaders in the world. His prestige in the telecommunications industry grew daily. Ebbers was a catalyst for change and other business leaders imitated his strategies. In a sweeping indictment of Ebbers' prominence, long-time industry analyst Jeffrey Kagan told Fortune magazine, "Bernie Ebbers is the modern-day Theodore Vail."

Ebbers' business success came to a startling end in 2002. On April 30 of that year, he resigned as president and CEO of WorldCom. According to Jim Wagner of Internetnews.com, his resignation came after months of falling stock value exacerbated by a Security and Exchange Commission probe into personal loans extended to him by the company to cover losses in his WorldCom stock and a federal look at the company's accounting practices. It was rumored that the resignation was not completely voluntary, with reports saying outside WorldCom directors were "worried over the flap caused by Ebbers' loans, prompting Bert Roberts, WorldCom chairman of the board, to replace him," Wagner explained.

In June of 2002, WorldCom shares tumbled after the company restated financial results by as much as $3.8 billion, a move that pushed it to the edge of bankruptcy. In July of that year, WorldCom filed for bankruptcy. In July of 2003, a United States judge approved a $750 million dollar settlement between WorldCom and market regulators, which marked a major step in the company's rehabilitation after an $11 billion dollar accounting fraud. Judge Jed Rakoff said in his ruling that liquidating the company would be unfair to the 50,000 employees and remove a major competitor from a market that involves significant barriers to entry. While several WorldCom senior executives were charged with securities fraud, Ebbers had yet to be indicted. However, "two recent reports--one by a court-appointed examiner and the other an internal probe by WorldCom--identified Ebbers as the source of a culture of fraud at the telecom giant," according to Yahoo! News.

Further Reading

  • Business Week, July 19, 1999; October 18, 1999.
  • Economist, September 13, 1997.
  • Forbes, July 6, 1998.
  • Fortune, August 2, 1999; February 1, 1999; December 8, 1997; November 25, 2002.
  • Kansas City Business Journal, October 8, 1999.
  • Newsweek, October 13, 1997.
  • Red Herring, May, 1999.
  • Time, October 13, 1997; September 22, 1997.
  • "About the Company," MCI WorldCom, http://www.wcom.com (November 1, 1999).
  • "Ebbers Leaves WorldCom," Internetnews.com, http://www.internetnews.com/bus-news/article.php/1025171 (July 30, 2003).
  • "Ebbers' Management Style May Save Him Yet," Forbes, http://www.forbes.com/2003/06/10/cx_da_0610topnews.html (July 31, 2003).
  • "Judge Approves Record WorldCom Settlement," Yahoo! News, http://news.yahoo.com/news?tmpl=story2&cid=569&u=/nm/20030707/tc_nm/worldcom_settlement_cd_5 (July 31, 2003).
  • "Press Releases," MCI WorldCom, http://www.wcom.com (November 1, 1999).
  • "WorldCom CEO Vows To Keep Going," CNN.com, http://www.cnn.com/2002/BUSINESS/asia/07/02/worlcom.biz/index.html (July 30, 2003).
  • "WorldCom Shares Tumble On Result," CNN.com, http://www.cnn.com/2002/BUSINESS/asia/06/25/worldcom.biz/index.html (July 30, 2003).

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