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AUGUST 2003 |
IN THIS ISSUE
MAIN FEATURE Insulin from Yeast : Indian Innovation By Deepak Goyal SOCIAL WORK Schooling Bengali Girls : Vidyasagar Foundation By Sukanta Bhattacharya INDEPENDENCE DAY SPECIAL What Have They Done to the Dream : Remembering the Freedom Movement By Ved Prakash Vatuk Publisher’s Note • Infotech India Tamil Internet: Global Meet in Chennai • Book Excerpt: Bernie's Bad Idea Healthcare and Language • Finance: Tips from a Pro Homeward Bound? Reverse IT Exodus Circle of Business: TANA Tech Meet Community: Bhagwati Jagran in Sunnyvale • Auto: 2003 Suzuki Aerio SX Bollywood • Tamil Cinema • Recipe: Apple Pickle • Horoscope |
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Publisher's Note
The prowess of India in software is old news, but a relatively underreported yet exciting story in recent years has been the growing savvy of India’s drug companies. Some companies today are doing cutting-edge biotech research on their own, and one of those, Wockhardt, is the first company in Asia to develop and manufacture human recombinant insulin. After 10 years of research Wockhardt has passed through the regulatory hoops and is manufacturing Wosulin—its brand name for the insulin—at its Rs. 150-crore biotechnology park in Aurangabad, Maharashtra. The benefits are immediate: the company’s foreign competitors are slashing prices as they scramble to position themselves against the new kid on the block. As activists never tire of telling us, the advantages of mastering technology is not some esoteric game. If the circumstances are right, it can make a real difference in the quality of life of the masses. Wockhardt’s development is one such happy incident. Veteran Marxist leader Biman Bose was in the U.S. recently to make a pitch for a laudable project: The Vidyasagar Foundation. The foundation plans to build over 50 schools all over West Bengal to promote female education. What’s refreshing about the foundation is that it’s not just all talk. A school is already under construction in Purulia, and it will take in 200 live-in students in 2004. We mark India’s Independence Day Aug. 15 with a poignant reflective essay by poet and folklorist Ved Prakash Vatuk, who witnessed India’s freedom struggle as a teenager. Greetings to all our Pakistani and Indian readers on Pakistan and India’s independence day. |TOP|
Main Feature  Insulin from Yeast: Indian Innovation - By Deepak Goyal India’s Wockhardt has become the fourth drug company in the world — and the first Asian — to make human recombinant insulin, and what’s more, it can sell it at dramatically lower prices, too, writes Deepak Goyal. Indian drug company Wockhardt became the first company in Asia to develop and manufacture human recombinant insulin, company chairman Habil Khorakiwala told reporters in Mumbai Aug. 4. “In India nearly 90 percent of insulin used are derived from pigs or cows but we have used the latest yeast-based technology,” Khorakiwala said. Wockhardt says this is Asia’s first vegetarian insulin, and it will avoid viral infections such as BSE and CJD associated with insulin derived from animals. The insulin available on the Indian market now is derived from pigs or cows which are proscribed respectively in the Muslim and Hindu communities. “This is a technology breakthrough not for Wockhardt, but for India.” Khorakiwala said. India has 30 million diabetes sufferers, a figure expected to rise to 57 million, or a fifth of the world total, by 2025, according to the World Health Organization. “I am happy to know that Wockhardt is set to launch India’s recombinant human insulin,” President A.P.J. Abdul Kalam said in a message to the company. “I am also delighted to hear that you have used yeast as the host cell. Please ensure that it is cost-effective and affordable.” “Wockhardt has truly done us proud,” Dr. R.A. Mashelkar, director general, Council for Scientific & Industrial Research, said in a message to the company. “This is a feather in the cap of Indian biotechnology research, which is now poised for positioning our industry globally,” he said. Wockhardt says it the first in Asia and fourth in the world to develop, manufacture and market its human recombinant insulin, which it calls Wosulin. In addition to health benefits as well as cultural compatibility, the development has another vital advantage: the pocketbooks of insulin users. “In a pre-emptive move this year, foreign drugs companies that dominate India’s insulin market cut prices by 30-40 percent from $5 per unit,” London’s Financial Times reported. “Wockhardt’s drug costs less than $3, compared with $6-$9 in other developing markets, and about $20 in mature markets.” The newspaper acknowledges the scientific achievement of the company. “Wockhardt’s drug represents a long-awaited breakthrough for the country’s fledgling biotechnology industry, which has been looking for a follow-up to the hepatitis B vaccine in the late 1990s,” the newspaper said. The breakthrough couldn’t come a day too soon. India is staring in the face of a diabetes public health disaster. Recently the BBC reported that the world’s largest diabetes epidemic was threatening India, which was ill-equipped to cope. According to health data the amount of type II or adult-onset diabetes in Indian cities is high and rising. Indians appear prone to developing diabetes later in life, and seem more vulnerable to its complications such as high blood pressure leading to coronary heart disease. A more Western lifestyle, involving fatty food and too little exercise, have been blamed. Obesity is a known risk factor for the development of diabetes. Dr. Vikram Seshaiah, medical director of the diabetes unit with the Apollo Hospitals in Chennai, told the annual conference of the Association of Physicians of India: “By 2005, we will have 30 to 35 million diabetics in India, and every fifth diabetic in the world will be Indian.” A study of complications in more than 3,000 diabetics by the Diabetes Research Center in Chennai showed that many had suffered eye, nerve or other tissue damage by the time diagnosis was made. More than a third of patients had high blood pressure, while 11.4 percent had developed coronary heart disease. Dr. Seshaiah told Reuters: “Our hospitals cannot manage this magnitude of complications. “In Government Royapettah Hospital in Chennai, the patients attending the diabetic clinic have increased from 6,190 in 1993 to a staggering figure of 19,991 by 1999.” Insulin-dependent diabetes patients have to use the drug for life and for that reason a vegetarian variety is welcome in India, which has the world’s largest population of diabetics. Wockhardt says it has launched the yeast-based insulin after 10 years of research. “Worldwide, there are only three manufacturers of recombinant human insulin,” Khorakiwala said. “Wockhardt is proud to have put India on the global map.” The company says three companies, one in the United States and two in Europe, control the global market for human recombinant insulin valued at over $3 billion. Wockhardt has now become the fourth company in the world to manufacture and market the product. Wockhardt is manufacturing Wosulin at its Rs. 150-crore biotechnology park in Aurangabad, Maharashtra. The facility, designed according to U.S. FDA standards, will also house new biotechnology products that are currently under various stages of development. “For Wockhardt and for me personally, Wosulin is a 10-year-old dream come true and a vindication of our decision to venture into pharmaceutical biotechnology in the early 1990s,” Khorakiwala said. Nearly 90 percent of insulin sold in India is derived from slaughtered pigs and cows. Most insulin consumers are unaware of the animal origin. All insulin sold in India today is imported either as finished vials or as concentrates which are converted into vials through third parties. The Indian market is valued at around Rs. 250 crores. Eyeing international markets, Khorakiwala says the company would first approach those markets where regulation processes were easier but the ultimate aim is to tap the U.S. and U.K.- Andrew Odlyzko - Deepak Goyal is a freelance writer. He lives in Kolkata. |TOP| Infotech India The firm said it saw continued growth performance for the sector over the next four years. According to IDC, the total Indian IT market grew by 21 percent to reach Rs. 73,219 crore in 2002. The total domestic IT spending reached Rs. 25,931 crore in 2002, a growth of six percent over the previous year. IDC expected the domestic sector to display a significantly enhanced growth performance of 16 percent in the current year. Domestic IT spending was expected to show growth with stability over the next four years displaying a growth of 21 percent with total IT spending expected to reach Rs. 55,925 crore in 2006, the firm said. Noting that exports (hardware, IT services and ITeS) continued to be the main drivers of growth for the Indian IT industry, it said the share of exports in the total IT market was expected to increase to 71 percent in 2006 from the current level of 65 percent. Stanford in Bangalore Infotech czar Wipro chairman Azim Premji, set the agenda for the two days in which several of the over 1,000-strong alumni shared their views at a conference on “Leading the world: Building a technology tiger.” “It is basically an opportunity to network with our alumni,” Stanford Asia Technology Initiative business development director Nishant Vijay Berlia said. Indian alumni include Reliance chairman Mukesh Ambani, Forbes Marshall director Dr. Naushad Forbes, Member of Parliament Jyotiraditya Scindia and Nadir Godrej. “Bound by a common factor and each being an achiever in their own field, the meet would serve as an ideal platform for them to gain a perspective of trends and new ideas, which is what Stanford is all about,” Berlia said before the conference. Infosys chairman and chief mentor N.R. Narayana Murthy, Stanford provost for under-graduation education Dr. John Bravman, Biocon India chairman Dr. Kiran Mazumdar Shaw, IITB director Sadagopan and Mckinsey managing director Ranjit Pandit addressed an ATI Global entrepreneurship conference August 7. Deep-sea Oil Hunt Code-named Sagar Samriddhi, the project involves investing $2.6 million per day in search of one-third of estimated 11 billion metric tons of oil and oil equivalent gas reserves lying unexplored in deep waters, ONGC chairman and managing director Subir Raha told a news conference here. “We are targeting to add 4 billion metric tons of reserves from the deep sea exploration campaign. If we can produce one fourth of these reserves, we will have one billion metric tons of oil and oil equivalent gas over 25-30 years. At 20 dollars a barrel, the revenues from this kind of production would be Rs. 644,000 crore,” he said. ONGC, which plans to drill 47 exploratory wells in its blocks spread across the Arabian Sea and Bay of Bengal, has hired Discoverer Seven Seas rig from Transocean Inc of US and the Belford Dolphin from Dolphin Drilling of U.K. besides its in-house Sagar Vijay rig for the deepwater campaign. ONGC director Y.B. Sinha said the firm’s current crude oil production of 26 million metric tons can go up to 49 million metric tons by 2011-12 and 62 million metric tons by 2016-17 for the discoveries anticipated from the campaign. Similarly, gas production can almost double from the present 65 million standard cubic meters per day over that period. Infosys Sponsored ADS The underwriters have a seven-day option to purchase up to 782,000 additional ADSs, representing 391,000 equity shares, a company statement said. Infosys would not receive any proceeds of the offering and the net proceeds after the issue expenses would be returned to all the selling shareholders within 30 days of the closing of the offering, it said. On July 25, 2003, the Indian invitation to offer concluded with 10,164 offers for 14,863,802 equity shares being offered for sale in the sponsored ADS offering. The unallocated shares would be returned to all the selling shareholders by August 16, it said. The maximum offer size of the Indian invitation to offer is 3,000,000 equity shares. The offering was lead-managed by Citigroup, Goldman Sachs (Asia) and Merrill Lynch and co-managed by Deutsche Bank Securities and UBS Investment Bank, the statement said. IT Kiosks in 1,000 Villages “Once it is operational, the villager need not go to the taluk for his land records or any citizen services. With this, the Bhoomi program, which is up to the taluk-level, would be extended to the villages,” Chawla said at the inaugural of the Confederation of Indian Industries-sponsored Singapore-India seminar on e-governance here. Asserting that the franchisee model by private players, levying a fee for services provided to villagers, would be a viable option through the kiosks, he said, the government would use the kiosks as a delivery platform for a host of services. “The farmer would pay a nominal fee for the service provided by the kiosk as he would save money and time for traveling to the taluk headquarters and the kiosk would be self-sustaining from day one,” Chawla said. However, he said, there was need for better and rugged equipment to withstand power fluctuations of the vendors. Stating that “Karnataka could learn from the experiences” of Singapore government in implementing e-governance, Chawla said the delivery mechanism in India would vary with a human element in an operator who would assist the citizens in the rural areas for accessing the services. ICICI OneSource Acquires FirstRing Details of the transaction were not disclosed. FirstRing, established in May 1999 as one of the earliest entrants into the third party BPO space in India, has over 800 employees and a 650-seat facility located at Information Technology Park Limited, an I-OneSource release said. FirstRing services more than ten U.S.-based clients and its investors include WestBridge Capital Partners, the Hero Group and Ravi Sethi, a Silicon Vally entrepreneur. The company focuses on voice-based services and has a strong presence in the financial services industry, the release said. ICICI OneSource, founded in December 2001, is one of the largest and fastest growing Indian BPO providers, with 2,700 employees and 1,350 seats across three operational centers. Post acquisition, ICICI OneSource will have over 3,500 employees and 2,000 seats across four delivery centers in Bangalore and Mumbai, with a fifth centre being built out in Mumbai, making it among the top few independent BPO players in India. Under the terms of the agreement, ICICI OneSource will acquire FirstRing’s India and US operations as well as the clients and workforce of FirstRing. Internet Rail Tickets Tickets can be booked on the Internet at the site www.irctc.co.in. Normal service charges at the rate of Rs. 40 per ticket for sleeper class and Rs. 60 per ticket for upper class tickets will be collected, a Southern Railway press release said. Agri-portal Kiosk The first interactive kiosk was inaugurated by Karnataka Chief Minister S.M. Krishna at a function in Bangalore. The kiosks, which will have audio and text mode in Kannada to provide information on land preparation, seeding operations, agricultural inputs, irrigation facility, plant protection and harvesting would be installed in all the 176 taluks of the state, IFFCO chairman K. Srinivasa Gowda said. The farmers can access the information at the kiosk without any charge and if they need a print out, a nominal fee would be levied, IFFCO managing director U.S. Awasthi said. He said the manned kiosk would also provide prices of cash crops and plantation commodities. “We have so far developed the software in English, Gujarati, Hindi and Kannada. We are planning to set up similar kiosks in other states too,” Awasthi said. I-Flex Q1 Net Drops Revenues, however, jumped by 32 percent at Rs. 183.43 crore from Rs. 138.82 crore, according to a company statement here. The company said it added nine new Flexcube customers during the Q1, with the Flexcube cumulative customer count crossing 150. Flexcube, it said, was an end-to-end product suite for consumer, corporate, investment and Internet banking, asset management, and investor servicing. It reported acquiring six new customers for the PrimeSourcing Line of Business during April-June 2003. PrimeSourcing, the company said, offers customized application development, re-engineering and maintenance; testing and product support and system integration services through various onsite/off-shore delivery models. ITI, China Ties Under the pact, ITI would pay ZTE Corporation a technology transfer fee of $1 million in the third phase when it takes up total manufacturing, expectedly next year. In addition, it would pay a five percent royalty on value additions, ITI chairman and managing director Y.K. Pandey told reporters here. ZTE’ vice-president marketing Joe F. Zhou was also present. In the first phase, ITI would take up fabrication of the equipment and in the second, the company would take up manufacture of ten printer circuit boards of the whole equipment, Pandey said. In August last year, ITI entered into an MoU with ZTE for supply of this equipment and so far its has supplied 150 KL to BSNL this year, which works out sales to the tune of Rs. 78 crore, he said, adding, ITI now expected to supply 200 KL to 250 KL each year depending upon the market conditions. According to ITI, the manufacturing agreement was a sequel to the long-term co-operation between the two companies envisaged for network upgradation and expansion of mobile facilities in India and SAARC countries. SMS on Basic, WLL Phones “The authority, after considering the background information, license terms and conditions, has decided that basic service licensees could provide SMS,” TRAI said in a letter sent to the basic service operators. Since WLL mobile service is a part of basic telecom services, the basic operators would be allowed to offer the SMS facility to its customers. The issue of allowing basic service operators to offer SMS facility was under TRAI’s consideration for more than a year and after various rounds of deliberations and discussion the regulator has given a go-ahead for this. With SMS facility, WLL mobile service will become more competitive vis-à-vis cellular mobile services. With this decision major beneficiaries would be Tata Indicom, Reliance Infocomm, Shyam Telecom besides two state owned organizations — MTNL and BSNL. Arcot R&D Centre The tech centre here has started off with 30 engineers, president and CEO of the California-based firm, a leading provider of secure e-payment and identity solutions for financial services, healthcare and security-conscious enterprise environments, Ram Varadarajan, told reporters in Bangalore. “Arcot is augmenting its R and D activities, and by addition of this facility in Bangalore it hopes to achieve a 100 percent growth in the coming year,” a company release said. He said the company was in talks with many banks in India regarding deployment of its Internet-based software, adding, an announcement regarding tie-up with one of them was expected in the next few weeks. Arcot focused on developing original solutions to address the challenges of securing e-business applications in Internet-scale and transactional environments, he explained. It provides authentication and access control solutions to secure the integrity of e-business in Internet-scale and wireless environments, company officials said. Ishwarchandra Vidyasagar is a Bengali cultural icon, revered across borders in West Bengal and Bangladesh as the father of modern Bengali prose, as well as an indefatigable and fearless social reformer. While he is most widely known in Bengal for his Barnoporichoy, a Bengali primer through which almost every Bengali learns to read, he was particularly keen to promote women’s rights. It is this particular cause that has been taken up by a foundation in West Bengal named in his honor, and the Vidyasagar Foundation is not letting the grass grow under its feet. The foundation has an ambitious plan of building day schools for girls in every district in West Bengal; right now a central residential model school is already coming up in Purulia, West Bengal under the foundation’s auspices. Construction of the Rs. 30 million school is going on in a 15-acre area, and the school is expected to be ready to accept 200 students in 2004. Ultimately the school will have 600 live-in students. Veteran Marxist leader and chairman of the ruling West Bengal Left Front Biman Basu, the secretary of the foundation, has been a long-time champion of literacy movement in West Bengal, being closely involved with the Bangiya Sakkharata Prasar Samiti, a voluntary organization that works to promote literacy at the grassroots level. Basu recently visited Los Angeles to make a pitch to the thousands of Bengalis who had gathered at the North American Bengali Convention, where the Vidyasagar Foundation had set up a stall. He said the initial response had been encouraging, and many people had stopped by and taken brochures and had promised to help. The 64-year-old political activist said that the Vidyasagar Foundation was not a political organization, nor was it affiliated with the state or central government. It was not even seeking government funds. Basu said the Purulia was chosen for setting up the residential school because the Ramkrishna Mission had a school for boys, and parents who sent their boys to the Ramkrishna school would find it more convenient to send their girls to this school. “Society cannot be changed unless women are empowered,” he said, adding that Vidyasagar believed this in his day, and the statement was just as true today. The effort of the foundation draws considerable inspiration from Vidyasagar, who has been described by poet Michael Madhusudan Dutt as a social reformer with the “genius and wisdom of an ancient sage, energy of an Englishman and heart of a Bengali mother.” This remarkable19th century reformer was educated to be a Hindu pundit steeped in Sanskrit traditions, but he was absolutely fearless and uncompromising against obscurant practices, fighting caste discrimination and suppression of women all his life. He fought for making widow remarriage legal for Hindus, and established the first girl’s school in Barasat. In 1857 he founded the Juvenile Female Calcutta School, and later founded 35 other schools for girls. When the British slashed the budget for schools, he kept 11 girls’ schools open with his personal funds and assistance from compassionate friends like the Raja of Burdwan. For most Bengali speakers, however, his most durable contribution is his “Barnaparichoy,” the book of Bengali alphabet that is widely available and used for beginning readers in every village in West Bengal and Bangladesh. Rabindranath Tagore called him the father of modern Bengali prose. He was passionate throughout his life in trying to promote female literacy. “Vidyasagar’s great saying was that a literate mother’s child can never be illiterate,” Basu said. Basu said that the foundation had just been set up officially in 1999, but he was delighted with the enormous grassroots enthusiasm it was generating. A famous mime artist had offered to perform free of charge to raise money, he said, while people were collecting rice in villages to help the foundation. The school in Purulia will aim to give a well-rounded education to the students. In addition to the academic curriculum, vocational skills ranging from stitching to poultry will be taught. Students will take phonetical class to enable them to speak in English. Computers will be taught at an early age. Extra-curricular skills like recitation, dance and music will be taught and there will also be facilities for indoor and outdoor games. Later on, the Vidyasagar Foundation plans to build schools for girls in all of West Bengal’s 19 districts. “In phases we plan to build 53 schools,” Basu said. Basu made an appeal to expatriates in the U.S. to help the foundation’s effort. “We are trying to walk down a new path,” he said. “In the spread of education, a great man like Vidyasagar spent the last day of his life. Keeping his ideals as our guide, we are trying to promote women’s education, to cleanse society of its darkness. We could really benefit if your readers help our efforts.” Interested readers can reach Vidyasagar Foundation by email at vidyasagarfoundation@yahoo.com. - Sukanta Bhattacharya is a bio-tech professional. |TOP| Conference:  Tamil Internet Global Meet in Chennai – R. Rangaraj The sixth conference on Tamil Internet will address issues like e-governance in Tamil, Web-based education in Tamil, under the theme “IT for Education in Tamil,” writes R. Rangaraj. The sixth in the series of Tamil Internet conferences, Tamil Internet 2003, is scheduled to be held in Chennai Aug. 22 to 24, Information Technology, Law and Electricity Minister D. Jayakumar said Aug. 4.. The conference will be inaugurated by Chief Minister J. Jayalalithaa on Aug. 22. The first conference of this series was held in Singapore (1997), the second in Chennai (1999), the third in Singapore (2000), the fourth in Kuala Lumpur, Malaysia, (2001) and the fifth in Foster City, Calif. (2002). The sixth conference is being organized in Chennai with the help of the Government of Tamil Nadu, steered by the Tamil Virtual University and Anna University, and supported by the International Forum for Information Technology in Tamil and Kanithamizh Sangam. Jayakumar said the chief minister had sanctioned Rs. 2 million for the conference and has assured full support from the government.. The IT Minister will chair the reception committee while Anna University Vice Chancellor Dr. E. Balagurusamy, and Tamil Virtual University director Dr. M. Ponnavaikko , are the co-chairpersons of the Tamil Nadu Organizing Committee. The inaugural session will be held in the Vivekananda Auditorium at Anna University. President A.P.J. Abdul Kalam will deliver an address through videoconferencing. The conference and exhibition are scheduled to be held at Hotel Taj Coromandel Aug. 22-24. The exhibition will be inaugurated by Jayakumar. It is expected that the Tamil software, keyboards and other devices developed by various computer industries, institutions and developers around the world would be displayed at the exhibition. IT secretary Vivek Harinarain said the exhibition being organized to attract a large population from in and around Tamil Nadu. In each of the Tamil Internet Conferences, problems faced by Tamil software developers and service providers in the world are discussed and suitable solutions derived. In the first few conferences, basic issues like standardization of encoding and keyboard development of editors, drives, etc., were discussed. In the later conferences, the technologies required for Tamil computing, language analysis, searching and sorting Tamil text, Tamil OCR, Tamil text to voice synthesizing, machine translation, Tamil search engine, etc., were discussed. The sixth conference will address issues related to e-governance in Tamil, Web-based education in Tamil, etc., with the theme “IT for Education in Tamil,” Harinarain said. Dr Balagurusamy said the main aims of the conference are:
Over 45 technical research papers have been accepted for presentation at the conference. The contributions are from India, Sri Lanka, Singapore, Malaysia, the U.K., Germany, France, the U.S., Canada, Australia, Switzerland. Harinarain said in the exhibition, over 40 Tamil software development tools among the school and college students would be demonstrated. They would be encouraged to acquire skills in Tamil computing, community-hub and educational-hub. Tamil software development competitions have been organized for the students. Tamil Virtual University director Dr. Ponnavaikko said more information was available at the following Web sites: www.tamilvu.org or www.infitt.org. There is no entrance free for the exhibition, but there is a fee for participating in the conference. Information on registration fee can also be obtained from the Web site. - R. Rangaraj is a reporter with Chennai Online. |TOP| Review:  Bernie's Bad Idea: Book Excerpt – By Om Malik Former Forbes reporter Om Malik charts the bizarre tale of telecom tycoon Bernie Ebbers, who was responsible for America’s biggest corporate con, according to his recently released book “Broadbandits.”
(The following essay is excerpted from “Broadbandits,” published by Wiley. We featured an article on the book in our previous month’s issue. Readers can read it by visiting our Web site at www.siliconeer.com and clicking on “archives” to reach our July 2003 issue.) Bernie Ebbers, the founder of WorldCom, had made a very bad bet and lost. The broadband business he had so ruthlessly built with other people’s money was being billed as the biggest corporate con in the history of America—even bigger than Enron. Ebbers had made the fatal mistake of believing his own hype, even as he bilked investors of their money. It was March 2002 when it all started to unravel. The Securities and Exchange Commission had finally caught on to the shenanigans at WorldCom and started an investigation. In a month, Ebbers would resign. Ebbers’ coconspirators, WorldCom Chief Financial Officer Scott D. Sullivan and Controller David Myers, had been grilled by the Internal Audit Committee and would ultimately be fired from the company. On August 1, they would surrender to the police, knowing they faced at least five years in prison, hefty fines of $250,000 and several counts including securities fraud, conspiracy to commit securities fraud, and filing false statements with the SEC. Bernie Ebbers, king of bandwidth, telecom titan, and corporate conqueror like none before, could be next. Every step that Sullivan and Myers would take to the police car waiting for them outside New York’s posh Hotel Elysee would take Ebbers farther away from his empire. “Fifteen unbelievable years and two very challenging years” is how Bernie Ebbers would describe his tenure at WorldCom on his 17th anniversary at the company on April 30, 2002.1 That would also be his last day at the company he had started in a Mississippi coffee shop in 1983. Ebbers’ story is classic American fare: an immigrant from a tiny town who made it big but in the end became the victim of his own success. Had he been manipulated by Wall Street shysters, or had the money been corrupting his soul one step at a time? Ebbers’ life began 60 years ago in a working-class neighborhood in Edmonton, Alberta, in western Canada. He attended Victoria Composite High School in Edmonton and supported himself through high school by working as a milkman and as a bouncer at a bar. It seemed like he was going to have an average working-class life, when his luck turned. Mississippi College, a small Baptist college in Jackson, Mississippi, offered the six-foot-four Canadian a basketball scholarship. He accepted, went to Jackson, got an undergraduate degree in physical education, and settled down in nearby Brookhaven. He worked as a basketball coach first, and then invested in a motel in Colonel, Mississippi, in 1974, which, after some hard work and savvy deal making, grew into a collection of Best Westerns in Mississippi and Texas. Along the way, he also acquired a car dealership in Columbia, Mississippi. By 1983, nine motels in the two states were controlled by his company, the Master Corporation. At that time AT&T, then the largest phone company on the planet, was in the process of breaking up into AT&T and seven local phone companies. The breakup was the result of a federal action prompted by lobbying and efforts of MCI, then a small long distance provider. Now anyone, however small, was free to compete for the phone dollars. Recognizing the winds of change, in 1983, Ebbers got together with four investors to fund a long distance reseller. WorldCom folklore has it that Ebbers and the three other investors, Bill Fields, David Singleton, and Murray Waldron, hatched the blueprint of the company at a Hattiesburg coffee shop. The company’s original name was apparently suggested by a waitress who inquired about what kind of company they were planning. According to WorldCom’s 1998 annual report, “[the] waitress walked away for a few minutes and came back with a napkin on which she had scribbled the letters “LDDC”—Long Distance Discount Calling. Later the name was changed to Long Distance Discount Service (LDDS). “We got in as passive investors, saw the gold at the end of the rainbow, and thought it was going to happen the next day. It didn’t work out that way,” Ebbers later told the Jackson Journal of Business. Instead, the company lost large sums of money in the first two years. The investor group decided to put Ebbers in charge. He was the perfect choice: A pennypincher, he got the company to focus on small business customers who spent less than $20,000 a year on long-distance phone calls. The big guns like AT&T and even MCI ignored this segment of the market, focusing instead on Fortune 500–type companies that ran up huge phone bills. Ebbers figured it was easier to nibble at the long distance market in untapped segments than to take on AT&T and MCI from the word go. By employing this strategy, his company was able to stay just below the radar and survive on telecom crumbs for the next decade. But soon mere crumbs would not be enough to feed Ebbers’ increasing appetite. After the AT&T breakup, several long distance discounters had the same idea as LDDS; they, too, had set out their shingles and gotten into the telecom business. But, like LDDS, most of them were struggling because they either lacked hardware expertise or were run by telecom engineers with no marketing and sales savvy. Ebbers quickly figured out that his company, which had both of these shortcomings, needed to get outside help. He found engineers and outsourced the hardware side of the business, but he still needed a marketing whiz. At a trade conference, Ebbers happened to met Diana Day, a former copywriter for a local television station who had once also done public relations for the Mississippi Republican Party. Day was working for a telecom reseller and was bored out of her mind when she met Ebbers, who decided to give her a shot at marketing. Turns out it wasn’t a bad bet. Day turned things around for WorldCom: Sales skyrocketed from less than $1.5 million in 1984 to $3.3 million in 1985 and $8.6 million in 1986. Around this time, Ebbers came up with another idea—growth through acquisition. It was a fairly simple strategy: Buy a company, keep its sales team, absorb its customers, and use LDDS’s cheap infrastructure. By 1987, Ebbers’ LDDS had bought five companies, mostly in the South. It was a perfect way to boost sales and become a big fish in, admittedly, a small pond, while staying away from AT&T, MCI, and Sprint. Bernie focused on customer service. He knew that if LDDS paid attention to its customers, it wouldn’t be long before more business would flow his way. While large companies typically ignored the small customers and treated them with scorn, customer service was his company’s hallmark in the beginning, with the company providing affordable long distance to everyone. It soon seemed that Bernie Ebbers was on his way to becoming the Sam Walton of the telecommunications industry. In 1989 LDDS acquired the publicly traded long distance reseller Advantage Companies of Atlanta, Georgia, and through the acquisition, LDDS became a public company. Also as a result of this acquisition, a key partner in future shenanigans, Stiles A. Kellet Jr., came into Ebbers’ supernova. Kellet was the chairman of the board of Advantage and became an LDDS board member after the merger. In later years at World-Com he would play a vital role in the great worldcon. Ebbers was now in contact with Wall Street and its financial analysts. One of them was Jack Grubman, then an analyst at the New York investment bank Paine Webber, who was eventually to play a major part in the rise and fall of Bernie Ebbers. “We both come from the wrong side of the tracks vis-a-vis the financial community. And I can relate to him far better than most people I deal with. Bernie and I would have a strategic session in Jackson, and it usually was while shooting pool and drinking beer,” Grubman would later say. Then, in December 1992, LDDS acquired another long distance reseller, Texas-based Advanced Telecommunications, for about $850 million. Ebbers’ life was about to get complicated. This acquisition brought with it a man called Scott Sullivan. When LDDS bought Advanced, Sullivan signed on as assistant treasurer for LDDS and was promoted to chief financial officer of the company by 1994. At about the same time, Jack Grubman quit Paine Webber and joined Salomon Brothers. If Grubman became the one who encouraged Bernie to grow bigger through acquisitions, then Sullivan was the one who massaged the balance sheets to make it happen. The unholy troika was complete. Ebbers soon went on an acquisition tear, and the “Bernie and Scott show,” as Wall Street dubbed it, had begun. Bernie would become the face of the company, Scott would bleed the acquisitions dry, and Jack would be the shill who would tout the company’s stock. LDDS shares started to go through the roof, giving Ebbers more currency to continue his shopping spree. To the outside world, Ebbers was becoming the monster with the insatiable appetite for telecoms, but in reality it was Sullivan who did the grunt work and was the real force behind all those deals. While Ebbers pranced around like a cowboy, Sullivan was busy explaining the various mergers to Wall Street. A former General Electric executive and Klynveld PeatMarwick Goerdeler (KPMG) accountant, he was quiet, had a way with numbers, and was the exact opposite of Ebbers’ aggressive, in-your-face personality. Had it not been for Sullivan, Ebbers would not have had the gumption, or the knowledge, to sell the complicated mergers to Wall Street. Surprisingly, the two men got along famously despite their contrasting personalities. They had adjoining offices and were often seen having lunch at the company cafeteria. Ebbers was a very suspicious man and a bit of a control freak. He never hired a chief operating officer and instead relied on a mere accountant to help run his business—perhaps because he didn’t want anyone to know the real facts. No one dared question Bernie and his ways. But he trusted Sullivan. In December 1994, Ebbers bought IDB WorldCom, an independent long distance phone company, for $936 million, and changed his company’s name to WorldCom—a more grandiose moniker befitting its new stature. A year later WorldCom bought Williams Technology Group, also known as WilTel, a network carrier, for $2.5 billion. By the end of 1995, WorldCom had sales of $3.9 billion and debt of $3.4 billion—the debt-to-revenue ratio was perilously high, and would remain so for the entire history of the company. But even then, no one on Wall Street dared question Bernie. He would stride into meetings with investors, his chief financial officer Sullivan at his side, put up a graph showing World-Com’s share price headed up, and smugly ask: “Any questions?” Ebbers got more audacious with every acquisition. For a while, it seemed there was no price he couldn’t afford. St. Bernie Rises The company built a shiny new office in Clinton, a town of 24,000 quite close to Jackson, the state capital. Ebbers’ company hired interns from local colleges and became a major sponsor of civic activities such as arts and crafts fairs and street festivals. He may have been a billionaire, but to the people of Mississippi he was one of them. Once he vowed that he would leave the state “only in a box.” He drove an old, dented Ford truck that had a loose fender, wore blue denims and boots to work, and even wore a pair of jeans with a tuxedo jacket to his second wedding in 1999. People would often see him walking about town chomping on a cigar. He would play pool, drink beer, and chat with locals as Willie Nelson music played in the background. Ebbers became so popular in the Jackson-Clinton area that people mentioned him as a possible gubernatorial candidate. But his long, flowing hair and homilies made him seem more like a country-and-western singer than a top chief executive or a possible governor. Ebbers’ act worked especially well with investors. They quickly developed a cultlike following for their hero, who would say things like “I’m no technology dude.” But behind the folksy façade, Bernie cultivated a taste for the good life. He was so caught up in his image as a takeover tycoon that he bought a $60 million yacht and named it Aquasition. He got other trappings of success |
