Stocks plunged on Wall Street within minutes of the opening today after US telecommunications company WorldCom revealed that it had uncovered improper
accounting for $3.8 billion.
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The Dow Jones Industrial Index, which has fallen in five of the last six sessions, plunged 180 points to below the 9,000 mark within three minutes of the opening bell.
This evening it had recovered somewhat to be trading 9,021.74, down 105.08 points, or 1.15 per cent.
The Dow is now at levels not seen since early October, when the stock market was recovering from the precipitous drop that followed the September 11th terror attacks.
The Nasdaq composite dropped beneath the post-September 11th closing low of 1,423.19, reached on September 21st. The Standard & Poor's 500 index also fell below its September 21st closing low of 965.80. Stocks recovered somewhat in later trading.
The euro closed the day just under $0.99 after earlier looking like it would climb to parity with the US dollar. The single currency has now risen more than 13 per cent since beginning its rally in early April at around 87 US cents.
WorldCom is one of the world's largest telecom companies with 20 million customers and 80,00 employees. It provides services from telephone calls to advanced Internet networks.
The company, which has $30 billion in debt, said it would restate results for 2001 and the first quarter of 2002 to show net losses.
It had recorded a profit of $1.4 billion last year. It said that $3.8 billion in operating expenses had been improperly recorded as capital expenditure. This allowed the company to boost cash flow and record a profit for the last five quarters.
The disclosure threatens to derail WorldCom's efforts to secure $5 billion in financing, without which it may face a cash-crunch next year, analysts said.
Last night the company fired its chief financial officer Mr Scott Sullivan and accepted the resignation of senior vice president and controller Mr David Myers. It also announced it will cut 17,000 jobs, or more than 20 per cent of its work force, starting on Friday, in a bid to save $900 million a year.
Based in Clinton, Mississippi, Worldcom entered the Irish market in 1995 when it acquired a 30 per cent stake in Irish telecommunications company TCL Telecom. In 1997 bought out the company.
WorldCom Ireland employs 180 people. It has headquarters in Dublin and regional offices Cork, Limerick and Galway. The company currently operates a fibre optic network in Dublin linked to business parks around the country.
US President George W. Bush described the accounting irregularities at at WorldCom "outrageous" and promised to "go after" those responsible.
"We will fully investigate and hold people accountable," Mr Bush said in Kananaskis, where he is meeting with the leaders of the Group of Eight industrialized nations.
Seeking to reassure anxious US and foreign investors, Mr Bush declared that "our economy is strong."
He said "the market isn't as strong as it should be" for three reasons - corporate profits, concerns about another terrorist attack, and corporate accounting scandals.
Worldcom's accounts were audited by Arthur Andersen, the firm that performed the same task for Enron. Andersen said WorldCom withheld information.
In Dublin by close the ISEQ index was trading at 4,697.32 points, down -150.74.
The US Securities and Exchange Commission, which had been investigating WorldCom, said it had ordered the company to file a detailed report on the disclosures. Shares of WorldCom plummeted in response to the news, losing almost three-quarters of their remaining value as they hit a low of 20 cents in after-hours trade from a close of 83 cents on Nasdaq.
The stock had traded as high as $15 at the start of the year and had touched a peak of more than $64 in June 1999.
In London, the FTSE 100 also fell sharply in trading. The index closed 100 points down, or 2 per cent of its value. Prices picked up slightly after a morning low of 4,442.9 which was only a whisker away from the post-September 11th closing low of 4,433.7. In Germany, the DAX initially dropped to below 4000 points before recovering in late afternoon trading.
Additional reporting APF &