[WorldCom, America's Second-Largest Long-Distance Carrier, Files for the Largest Bankruptcy Protection in History
On April 2, local time, WorldCom, which had been struggling amid an accounting fraud scandal, ultimately filed for bankruptcy protection in a New York court.
With total assets of 107 billion dollars, WorldCom's bankruptcy surpasses the combined totals of Enron at 63.4 billion dollars and Global Crossing at 24.1 billion dollars, making it the largest corporate bankruptcy in U.S. history.
WorldCom's stock, which once traded above 60 dollars, has now plunged to 0.09 dollars, effectively becoming worthless.
Alongside the bursting of the dot-com bubble, last year's global downturn in the telecommunications market and intensified price competition with rivals such as AT&T and Sprint sharply eroded its profitability…]
Bathed in warm sunlight streaming through the large floor-to-ceiling windows, Seok-won sat alone at his desk, holding the morning newspaper open in both hands.
A light knock sounded, and Na Seong-mi entered, setting down a cup of coffee rich with the aroma of freshly ground beans on the desk.
"Thank you. I'll enjoy it."
Seok-won looked up as he spoke, and Na Seong-mi gave a slight smile before asking,
"Is there anything else you need?"
"Not right now. You can get back to work."
"Understood."
Hearing the door close, he lowered his gaze back to the newspaper in his hands.
After finishing the prominently featured article about WorldCom's bankruptcy, he folded the paper in half and set it down, murmuring to himself,
"So it's come to this after all."
It had been largely expected, but once WorldCom officially filed for bankruptcy, the shock sent all three major U.S. indices tumbling sharply.
The impact rippled across the Pacific, rattling Japan's Nikkei as well, though fortunately, the domestic stock market remained relatively unaffected.
Before his regression, there had been a saying that when the New York stock market sneezed, Korea would come down with a full-blown fever. Now, however, the reaction was completely different.
"At least for now, the domestic market isn't overly sensitive to overseas markets. That's something."
But knowing the future, when the influence of foreign investors would grow rapidly, and they would toy with the index at will, treating it like an ATM they could withdraw from whenever trouble arose, Seok-won's expression turned faintly bitter.
He lifted the cup and took a sip of coffee. Almost as if on cue, his phone vibrated.
Glancing at the name on the screen, Seok-won answered immediately.
[Boss! Is this a good time to talk?]
Landon greeted him in a bright voice.
"You sound pleased. I'm guessing the profit settlements are all wrapped up?"
[Hahaha. That's right.]
As the hearty laughter continued, Seok-won asked with anticipation,
"So, what's the number?"
[We closed out the entire position at thirty-four cents per share, locking in a 98.1 percent return. After deducting fees, we've secured a profit of 81.14 billion dollars.]
While the New York market was reeling from the underwhelming stimulus package and WorldCom's bankruptcy filing, Eldorado Fund, which had placed a massive short bet, had once again hit an astronomical jackpot.
A satisfied smile spread across Seok-won's face as he said,
"Good work."
[We simply moved according to your instructions, Boss. There's nothing for us to take credit for. It's your foresight in predicting that WorldCom would end up like this that's truly remarkable.]
Seok-won leaned back in his chair, letting Landon's enthusiastic praise roll past him without much reaction.
"I thought they might hold out a little longer after selling us UUNET and bringing in some cash, but they didn't even make it two weeks before filing for bankruptcy."
[As you know, WorldCom was sitting on thirty-two billion dollars in debt. The 1.1 billion dollars they received from selling UUNET wasn't a small amount, but it was nowhere near enough to rescue a company that was already on the verge of sinking.]
Seok-won gave a small nod in agreement.
"With their credit rating downgraded to junk, they were blocked from taking out loans or issuing new bonds. Even if some cash came in, without a way to secure additional funding, it's like pouring a bucket of water into the desert."
[Exactly.]
It was a misfortune for WorldCom, but thanks to it, Eldorado Fund had acquired UUNET, which handled nearly half of the world's internet traffic. From their perspective, it was like picking up a solid block of gold at a bargain price.
[By the way, there's another piece of good news.]
"What is it?"
[Xerox has reached out, saying they're willing to sell PARC.]
At the long-awaited news, Seok-won's eyes widened, and he straightened in his chair.
"Didn't Xerox's management firmly refuse to sell?"
[They did.]
"Then why the sudden change of heart?"
[It's all thanks to WorldCom.]
"…?"
Seok-won's puzzled expression faded as Landon continued explaining.
[After WorldCom filed for bankruptcy, Xerox's management must have felt a sense of crisis, fearing they could end up the same way. It seems they've finally decided to sell PARC, which they had been holding onto so tightly.]
Seok-won responded as if everything now made sense.
"So WorldCom's bankruptcy ended up unexpectedly helping us."
[Haha. It certainly did.]
[But since they've decided to sell, it looks like they intend to get the highest possible price. They're asking for quite a steep amount.]
"How much are they demanding?"
[They want 1.5 billion dollars, including all the patents held by PARC.]
"That's exactly five hundred million more than what we offered."
[To be honest, it feels unreasonable. They're the ones in a tight spot, not us. If we drag out the negotiations a bit, we could probably bring the price down.]
"Hm…"
Seok-won stroked his chin, thinking it over for a moment before making a decision.
"No. There's no need to waste time. Let's just sign at the 1.5 billion dollars they're asking."
[PARC's research capabilities are strong and their patent portfolio is valuable, but even so, isn't 1.5 billion dollars too high?]
Landon sounded slightly concerned, but Seok-won did not hesitate.
"We're indeed paying more than expected, but it's still far from a bad deal. There's no need to worry."
After saying that with certainty, Seok-won took a sip of coffee and continued,
"You mentioned we were in the process of closing out our short position in Xerox."
[That's right.]
"How much profit are we looking at?"
[We haven't fully closed the position yet, so we'll need a bit more time to be certain, but it should exceed 2.4 billion dollars.]
Seok-won gave a small shrug and replied in a calm tone.
"Then even if we acquire PARC for 1.5 billion dollars, considering what we made from the short bet, it's not really a loss, is it?"
[Well, when you put it that way, you're right.]
"When we finalize the deal, let's have Thoth make the acquisition instead of Eldorado Fund."
[Since it's a research institute, it would indeed be more efficient for Thoth to manage it rather than us. I'll proceed that way.]
Thoth was a patent-focused company Seok-won had personally established, named after the Egyptian god associated with knowledge, scholarship, writing, and calculation.
From Mosaic, the first graphical web browser, to the foundational MP3 technology and the thousands of digital camera–related patents acquired from Kodak, all were held and managed there.
'And once PARC's countless patents are added to that, it'll create a patent monster powerful enough to make even IT giants tread carefully.'
From smartphones to internet search, he effectively held the foundational technologies for industries that would explode in size in the years ahead. That meant companies would have no choice but to pay a percentage in licensing fees every time they made money.
Yet despite amassing such a vast and powerful patent portfolio, Seok-won had so far refrained from demanding royalties, aside from the MP3 technology patents. He had simply let things run their course.
'The internet is still barely taking its first steps, and the smartphone market doesn't even exist yet. If I start collecting licensing fees now, it's no different from killing the goose that lays the golden eggs.'
He intended to let companies use the technologies freely for now. Once the market was fully formed and they found themselves unable to escape the web of patents he controlled, that would be the time to send the bill and collect every last bit of accumulated royalties.
Leaning back comfortably in his chair, Seok-won took a slow sip of coffee and said.
"Given how weak the industry's been lately, and with Enron and WorldCom going bankrupt one after another, telecom equipment stocks are all in bad shape, right?"
[Yes. Sprint, which WorldCom once tried to merge with, has fallen more than twenty percent, and even AT&T, the largest telecom company in the United States, has seen its stock plunge below five dollars. The entire sector is, quite literally, a mess.]
Considering that AT&T had been trading above twenty dollars as recently as the end of last year, it was clear just how badly telecom stocks had deteriorated.
Across the board, telecom companies, regardless of size or financial health, were in free fall, unable to escape the shock of bankruptcies and the bursting of the bubble.
Seok-won's eyes sharpened like a predator spotting its prey.
"They may be staggering under the weight of excessive investment over the past few years, but if telecom companies with solid revenue structures are trading at bargain prices, that sounds like a perfect opportunity to buy low."
[Are you planning to accumulate telecom stocks?]
A slow grin spread across Seok-won's face.
"I said it before. Right now, with one bad headline after another, nobody even wants to look at the sector. But once the internet era truly takes off, telecom companies will be among the biggest beneficiaries. If golden assets like that are being treated like stones, only a fool would sit back and do nothing."
[As you said, they're struggling now, but once the economy improves, their stock prices could rebound quickly. On top of that, the dividend yields are attractive. Even if we start buying, the risk doesn't seem that high. Most of them have already fallen by more than half, so the biggest appeal is how cheap they've become.]
Seok-won did not hesitate.
"Pour all the profits we made from WorldCom into it. Sweep up every undervalued telecom stock sitting at the bottom."
[All 81.1 billion dollars?]
Landon sounded startled.
"That's right."
[With telecom market caps already shrunk from the crash, if we inject that much capital, we'll end up becoming the largest shareholder in quite a few companies.]
He let out a disbelieving laugh as he said it, and Seok-won responded without the slightest hesitation.
"That wouldn't be a bad outcome."
[Hahaha.]
Even though he couldn't see him, Seok-won could almost picture Landon shaking his head in resignation.
[Understood. I'll proceed as instructed.]
"Oh, and when you're buying, make sure to secure as large a stake as possible in BlackBerry."
Landon replied in a puzzled tone.
[By BlackBerry, do you mean the Canadian company that makes two-way email devices?]
"That's right."
With a built-in modem, the BlackBerry device allowed users to check email without any additional equipment, open attached Word or Excel files, and even type documents using its compact keyboard. It had practically become an essential tool for Wall Street traders.
Landon himself used a BlackBerry, so he accepted the instruction without much further thought.
[Understood. I'll take care of it.]
After ending the call, Seok-won set his phone down and smiled faintly.
"It's already doing well, but once they release an early smartphone model with phone functionality later this year, the stock will go through the roof. We need to buy as much as we can now."
TL/n -
BlackBerry Limited (then called Research In Motion, or RIM) was a Canadian company that built wireless email devices. In 2001, it was one of the fastest-growing tech firms in North America.
By 2001, BlackBerry devices were becoming essential tools for executives and government officials. The big innovation was secure, push email. Emails arrived automatically on the device without manually refreshing.
That was a huge deal at the time.
In 2001, RIM introduced early converged devices that combined phone and data functions, leading to models like the 5810 (released shortly after). These were early steps toward what we now think of as smartphones.
After the 9/11 attacks in 2001, BlackBerry's encrypted messaging systems were heavily relied upon by governments and financial institutions. Its secure infrastructure boosted its reputation significantly.
BlackBerry owned important patents around mobile email and wireless data transmission. In the early 2000s, it was aggressive in defending those patents, most famously in its legal battle with NTP (which later resulted in a large settlement in 2006).