Description

WCOM is getting out of the residential long-distance business...sort of. Once the spin-off of MCI is complete, WCOM will be a lean, mean Internet infrastructure & services machine.

Many will look at the business of residential (and even corporate, for that matter) long distance and think it's nothing more than a commodity. Well, to them, I would say, "You're right." This is not where WCOM wanted to be going forward, and I think that CEO Bernie Ebbers is doing the right thing by spinning off this dwindling business. Though MCI throws off a heck of a lot of cash flow, this is the perfect time for Ebbers to distance WCOM from consumer long distance and a lot of debt.

Now that WCOM management knows how it will "increase shareholder value" (as they put it), I think that they can focus on the company's high-growth areas. These areas include Internet hosting and infrastructure, international telco, and a multitude of business services.

Bernie Ebbers is a master of the deal. He is an M&A genius, and he's got the clout and cash flow to continue to build his communications empire. With a relatively clean slate (after loading up MCI with lots of its current debt load), Ebbers will be able to churn his synergetic acquisition magic.

With the market negative on anything Nasdaq-related, I think that investors have a relatively small window to purchase shares of this 800-lb. gorilla.

Catalyst

1) WCOM should close its acquisition of Intermedia (which will give it control of Digex, which is in the high-growth area of Web hosting services) early next year.
2) The spin-off of MCI will allow management to re-focus on areas of high growth.