Oh how you have forgotten that CEO's and CFO's were sued and chased out of office for having LESS than rosy predictions back in the 90s. You can't have it both ways. To think WCOM really has a lot of bearing on the economy is crazy. The stock was already under a buck and everyone knew the only reason why it had any value was the hope that people would be foolish and buy up its parts for too much. It had no chance and this just sealed its fate. Agreed that this was ridiculous, I am heavily involved in these types of issues in my job and you don't "find" $4 billion misplaced in capex, that is just stupid. I personally think there is a lot more to this that you will never find out. There is no way in hell, I repeat, no way in hell they just "found" it. My guess is that they were playing on the edge with their capex/ordinary expense line, which all companies in this type of field will do. This business is all about investment for future revenue so it becomes a judgement call. Now that Ebbers was out, they had nobody fighting to keep the company afloat as it is. After all they have $8 in cash flow a year, they could sit on that and be fine if it weren't for the debt load. They come out and take anything that could possibly be construed as a "mistake" and take the hit for it. Creates a convenient mess that speeds up bankruptcy and gets it a good chance to wash its hands of a lot of worthless business. They will emerge with a solid core of cash generating business and zero debt. Its so obvious to anyone with a clue. The CFO was going to go anyways, he makes an easy scapegoat too. Only repercussion that could come out of it is that all telcom is going to get taken into the fire now. EVERY TELCOM COMPANY HAS ISSUES LIKE THIS!


Simple way to think about it. Lets say you own a toll road. Well you go out and build a new stretch of toll road. This is a 6-lane road that looks foolish for now because no one lives out there. You get almost no tolls. However you build it because you know three homebuilders want to build 15,000 homes at the end of your road. Here comes the situation at hand. You can expense this road, saying well we are going to earn SOME revenue right now, but not very much. Or you capitalize it and say we are really building this road for 5 years from now and the road is a long-term investment that we should write off over say 25 years. This is what telcom does. They make investments in wiring and networks that have vast future potential, but minor short-term potential. They could be considered either capital or ordinary expenses, but there is so much leeway in the rules as to what has to be one or the other type of expense that there are many situations you could argue for either one. For earnings perspective, capital is the far superior choice, you only take a small charge right now. However, the investor doesn't seem to realize that it makes no difference. You can take your hit now or later. If investors weren't so short-sighted they would realize that whether WCOM reached "EPS" from its investment now or in 3 years, it makes no difference, the cash generated by their vast investments will be EXACTLY the same! I am think they were maybe a bit agressive and called it all capital in the past when maybe a portion of it could be considered ordinary expense. Now they are saying we really want to go into bankruptcy and this is the easiest way to do it by saying we fraudulently called it capex, we don't want to pay our debts anymore and don't care about our shareholders since their stock is worthless anyways. Its a nice clean sweep. You have new management opportunities then as the old generation of managers are gone and already got their money. Funniest thing will be all the shareholder lawsuits coming out. Who are they going to sue? Who has money to give them now? They don't have an auditor to go after, they can't get at management cause they are all gone, they can't blame anyone but themselves really. They took a chance on a company that clearly had risk in their tons of debt and competitive market and they lost. Its time for these people to wake up. That is the nature of the market, you take risk whenever you buy a publicly traded company. You can claim Ebbers and Co defrauded you all you want, but I don't buy it. You made him do it with your demands for earnings. If he didn't get agressive with his accounting and try to gain a big share of the telcom market through big investments serviced by high-yield debt back when it was hot you wouldn't have invested and you would have abandoned him in Mississippi long ago. This one is all on the greed of the shareholders I am afraid. The numbers were all there for you, plain as could be. Maybe you got tricked by the analysts, small excuse, but people have to stop blaming others for their investment losses. This is a good example of it. There weren't any real phantom losses, the earnings would have paid for it down the road. I know a lot of people will disagree with me on this and maybe something else comes out of it in the future, but from the info I see now and the mindset of the investors of the late 90s, this is a great case to restate the obvious: STOCKS CAN BE RISKY...