WorldCom Eyes a Tracking Stock

WorldCom Inc. is likely to create a tracking stock for its consumer and wholesale operations, rather than selling or spinning off the units, sources familiar with the situation said Wednesday.

The move would represent a strategic shift for the company, which is reeling from a flagging stock price and its failed $120-billion acquisition of smaller rival Sprint Corp. It also comes as long-distance rival AT&T; Corp. weighs a massive overhaul of its operations.

Just four months ago, WorldCom Chief Executive Bernard Ebbers said he was not interested in breaking up the company. That position was reversed in July, however, when the company acknowledged it had begun exploring the future of the slow-growing consumer and wholesale units.

By breaking off the two units, WorldCom will distance itself from the ailing voice market and focus on its fast-growing data, Internet and international operations.

WorldCom, now the nation’s second-largest long-distance telephone company, declined to comment.

The announcement is expected the week after WorldCom releases its third-quarter earnings Oct. 26, said the sources, who spoke on condition of anonymity.

The company has not made a final decision, but it increasingly favors the tracking stock option, the sources said. WorldCom executives believe it would not be tax efficient to sell the units and a spinoff would be too complex, one source said.

Shares of Clinton, Miss.-based WorldCom rose $2.13, or 10%, to close at $23.94 on Nasdaq as the broader market posted steep declines.

But the company’s share price has fallen 53% this year amid a general decline in telecom stocks and the collapse of its planned merger with Sprint, which was blocked by antitrust regulators.