Outlook: Cable & Wireless

CAN IT really only be four months since Dick Brown walked out of Cable & Wireless? At the time, the general view was that the Texan's two-year tenure as chief executive had been a success. Now the picture looks rather different. A 23-page lawsuit, filed by C&W in a court in Delaware, places a huge question mark next to the US internet business it bought from MCI Worldcom for $1.7bn last September. At the time Mr Brown, with his usual restraint, hailed the deal as a "huge leap". It now appears he was sold a pup. Since C&W took control revenue growth has slowed, service quality has slumped, and customers have been leaving in droves.

C&W claims this is all MCI Worldcom's fault. The US group has allegedly breached the terms of the agreement with C&W by not transferring enough staff, attempting to poach customers, and generally making life difficult for the new owners. However, this raises questions about Mr Brown's supposedly legendary deal-making skills. Signing an agreement that relied so heavily on MCI - once described as a law firm with a satellite dish on the roof - was perhaps asking for trouble.

All this means relatively little for Mr Brown, safely ensconced at EDS' headquarters back in Texas (although EDS shareholders may want to take another look at the strategic alliance Mr Brown signed with MCI Worldcom, to great acclaim, back in January). For C&W, however, it further stretches the odds of it surviving as an independent company. Sure, C&W may win the case. But in the fast-forward world of the internet C&W has already lost vital ground to its rivals. No amount of damages will ever enable it to recover that ground.

C&W shares lost less than 3 per cent of their value yesterday, reflecting the market's belief that they are trading at a discount to the value of C&W's assets. Mr Wallace may have little choice but to realise that value by breaking up the company. If he doesn't do it, somebody else might.