[FOUNTAIN]Acquire now, pay later

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[FOUNTAIN]Acquire now, pay later

England's George Hudson was called "The Railway King" in the 1840s. Mr. Hudson was born to farmers and founded a railroad company in 1842. In two years, Mr. Hudson came to own 1,000 kilometers of rail track, at the time the equivalent of one-third of all railways in Britain. His company grew larger with numerous acquisitions, which he bought with money from selling stock, as the railroad industry, then a beloved child of new technology, boomed.

As the investment boom in railroads grew excessive, and interest rates rose, the bubble finally exploded with a crisis. In 1849, seven years after launching his company, Mr. Hudson was ousted from the firm and had to flee to Europe. Twenty-two years later, he died leaving just a few hundred dollars.

Bernard Ebbers, who resigned last week as the chief executive of WorldCom Inc., shares similarities with The Railway King. Mr. Ebbers was born in 1941 in Edmonton, Alberta, Canada, and earned money as a boy by delivering milk. He went to the University of Mississippi on a basketball scholarship. After serving as a basketball coach and managing a motel chain, he moved into the telecommunications business in 1983 by co-founding a long-distance telephone company called LDDS.

Mr. Ebbers focused on acquiring competitors, just as Mr. Hudson did, forecasting that telecommunications would become the core infrastructure of the New Economy. He took great advantage of the roaring stock market of the 1990s. Regardless of the amount he spent on acquisitions, the stock price of his company surged, making up for acquisition expenses. Mr. Ebbers's buying frenzy peaked in 1998 when he acquired MCI for $37 billion. His goal was to make the stock in his company the most valuable on Wall Street.

Problems lay in his obsession with mergers and acquisitions. WorldCom was in decline after his attempt to buy Sprint for $120 billion, which would let him dominate the telecommunications industry, was vetoed by the Fair Trade Commission. With the collapse of the Internet industry, the main market for WorldCom, the company stumbled. WorldCom's stock price plunged to $2, compared to $64 at its peak at the end of 1999. The U.S. Securities and Exchange Commission is investigating the charge that Mr. Ebbers borrowed $370 million to prevent a further drop in the price of his company's stock. Mr. Ebbers may end up losing his wealth and spending time in jail.

It will be interesting to see whether Mr. Ebbers can avoid the same fate of The Railway King.

The writer is an editorial writer of the JoongAng Ilbo.

by Sohn Byoung-soo

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