company set out to make a place for itself in the long-distance
telephone market, MCI Communications Corp. has survived the rites of
passage into corporate adulthood.
MCI, long considered a brassy and freewheeling risk-taker, has
honed its management style and developed a strategy that has made it
a $5 billion company and the major long-distance competitor of
industry leader American Telephone & Telegraph Co.
``They are a full-service firm that can compete on all fronts
with AT&T,'' said Jack Grubman, a telephone analyst with PaineWebber
Inc. ``The growing up and pains associated with that are for the
most part behind them and they're looking at a long run of pretty
healthy growth ahead.''
MCI Chairman William G. McGowan, who on Aug. 8, 1968, founded
the company that became MCI, also sees good things ahead for his
company, but only with continued hard work and long hours - not even
time out for a birthday celebration.
``I think the challenge is always in front of us,'' McGowan said
as the company quietly closed out its 20th year in business.
``If we start saying things too much about how long somebody's
been with us, then you end up in effect implying there is success
and security and you can rest on your laurels a little bit, and
that's not true. It's a tough competitive industry and we've got to
stay tough and fresh and look at it as a challenge every day,'' he
That attitude is what has driven MCI, whose pioneer effort to
compete in the long-distance industry influenced the government's
decision to try to break up the AT&T telephone monopoly.
``We had to be bold to survive. We had to be fast on our feet
and we had to be pushy and we had to be demanding and we had to take
risks,'' he said. ``The meek. . .may inherit the Earth, but they
won't increase market share.''
MCI surprised analysts last month when it reported a nine-fold
increase in second-quarter profits, confirming the self-confidence
it displayed a week before when it announced it would buy back the
16.2 percent stake held by International Business Machines Corp.
In the quarter that ended June 30, MCI reported record net
income of $73 million on record revenues of $1.2 billion,
strengthened by increased sales of 800 and international services
and continued penetration of large corporate accounts.
The good news followed a successful first quarter with record
earnings, instilling confidence among analysts who have been
watching closely as the company has staged a steady comeback from a
tumultuous 1986 when profits were disappearing and its stock price
That year MCI's profits were squeezed by price cuts it had to
make to keep its rates below those of AT&T. MCI cut staff by 15
percent and took a $550 million writeoff of network assets. The
company ended the year with a $448 million loss.
Making matters worse, McGowan suffered a heart attack in
December 1986. The following April, doctors replaced McGowan's
diseased heart with a healthy one and soon he was back on the job
with renewed spirit. Though he is 60, McGowan jokes that ``since I
average out my parts, I'm down there'' in age among the company's
McGowan's illness came at a crucial time for the company. The
telecommunications industry was changing and MCI had to figure out
where it fit in the market.
The government was pushing down the rates of AT&T, the largest
long-distance company and the only one subject to federal