Face to face with the new CEO of WorldCom

Michael Capellas quit HP as president to take on the mantle of CEO in the bankrupt telecom giant WorldCom this November. He takes over from John Sidgmore. Now speculations are rife over whether Capellas can turn his visions into reality… whether he can pull off the biggest business turnaround ever.

With 20 + years experience, Capellas is known to be a seasoned manager, with expertise in e-commerce, information technology, supply-chain management, product development, software and solutions. He has also managed quality assurance programs, has been with startups and has had hands-on experience in key areas involved in running a global technology company. He has the reputation of an information technology executive with a rare balance of strategic insight, operational expertise, technological and financial skills, and sales/marketing.


Before WorldCom
Capellas did his bachelor's degree in business administration from Kent State University in 1976. He began his career at Republic Steel Corporation. Between 1981-1996, Capellas held several senior positions at Schlumberger Ltd., including serving as the company's first corporate director for information systems and as controller and treasurer of Schlumberger's operations in Asia Pacific.

Before joining Compaq in 1998, Capellas held senior positions at Oracle Corporation and at SAP America. At Oracle, he was senior vice president and general manager for the company's global energy business. His job profile included product development, marketing, sales, consulting and client support.


At SAP America, he was director of Supply Chain Management. Prior to joining SAP, Capellas was managing partner of Benchmarking Partners, a leading information management-consulting firm.

Capellas was one of the driving forces behind the computer mega-merger of Compaq and Hewlett-Packard around six months back. He was chief executive officer and chairman at Compaq and president of HP. As president, he was chief executive - Carly Fiorina's second in command and responsible for day-to-day operations.


As CIO at Compaq, Capellas planned and implemented the successful transformation of the company's information technology systems to capture the opportunities and meet the demands of the Internet and e-business era. Capellas was said to have has a clear understanding of where information technology was going and a strong vision of Compaq as an innovator and a global IT leader. He brought in three powerful qualifications to his job:

  • Intimate knowledge of information technology and its key role in business success
  • A customer-centric point of view born of his experience as a chief information officer and a sophisticated IT customer
  • A compelling vision for the future of IT and how it can transform businesses, institutions and society at large.


When in Compaq, employees from its acquisitions of Digital and Tandem were at odds with Compaq, and the company had lost face with investors and customers. It was then that chairman Ben Rosen called upon Capellas (then the chief information officer) to fix the problem. He is said to have overhauled the management and production, tackled the culture issues and sought to restore Compaq's credibility in the marketplace. Howard Schultz, chairman of Starbucks, who worked with Capellas to install wireless net service across the coffee chain says, "He's able to create trust and confidence with a number of constituencies and inspire people".


Challenges ahead
His past positions and experiences might stand him in good stead for the uphill task ahead. But for the moment, Capellas faces several challenging tasks in his new role. These include:

  • Restoring WorldCom's reputation with customers, investors and creditors.
  • Raising the moral of a demoralized workforce.
  • Fending off competitors invigorated by WorldCom's weakened state.
  • Filing a reorganization plan for the largest bankruptcy in corporate history, at $107 billion in assets.
  • Implementing any settlement WorldCom negotiates with the Securities and Exchange Commission, which is investigating the company's $9 billion so far, in accounting errors.
  • Being a technical person, he is literally an outsider here; so he must learn to navigate the notoriously clubby world of telecom.
  • Finding a way to make money, something his predecessors apparently achieved mainly through bookkeeping trickery.
  • Fighting off the biggest question, which is not about his drive, but his abilities to deliver.


His current takes
Capellas is said to be pooling in on all his experience at HP for ways to cut through the murk of WorldCom's finances. Capellas says that WorldCom needs to fix its cost structure - something that might come as a surprise to investors who'd heard for years that WorldCom was one of the most frugal companies. Capellas' explains further that the company did some cost cutting around mergers but never undertook the heavy integration that brings big savings.

Capellas will also face the uphill task of bringing in the sales. He says, "Having a competitive cost base is the price of poker in a technology company…then you have to offer competitive services." Capellas wants to boost customer care and wants to move the company into a higher gear with higher margin, value-added services and "solutions," along the lines of HP and IBM.


These are a few challenges Capellas has to contend with, but the only solid ground that he stands on right now is his commitment to lead the resurrection. Much of his success or failure will depend on external factors - not ones within his control - such as the performance of the economy and any additional WorldCom bombshells that might hit. As for the corporate world, it will have to wait and see if Capellas can really pull off the biggest business turnaround ever or just be a has-been.