NEW YORK (CNN/Money) - WorldCom Inc. said Wednesday it was cutting 3,700 jobs, or 4 percent of its work force, as the No. 2 U.S. long-distance company struggles to cut costs.

The cuts will be made at WorldCom Group, a unit that provides telecom and data services to businesses and has been especially hard hit by the recession and the sharp reduction in technology spending. The September terrorist attacks caused further spending cutbacks. The company's MCI subsidiary, its main consumer long-distance arm, will not be affected.

The cuts are less drastic than some earlier reports of a possible 10 percent reduction in its work force of 75,000.

Affected employees will receive a severance package tied to their length of service, the company said in a statement.

WorldCom (WCOM: down $0.16 to $6.62, Research, Estimates) shares sank more than 2 percent after the announcement.

Clinton, Miss.-based WorldCom has been reducing staff and initiating other cost-cutting measures to help it weather a slowdown in its core telecom business as well as a Securities and Exchange Commission probe of its accounting practices.

Earlier Wednesday Lehman Brothers slashed its "strong buy" rating on WorldCom to "market perform" and cut its price target to $8 from $22.50. Lehman said it saw "minimal growth" in earnings in coming years.

Credit Lyonnais Securities also cut its rating on WorldCom for the second time this year, lowering the stock to "hold" from "add."

"I think there are a lot of uncertainties about the company that need to be answered," Credit Lyonnais analyst Rick Grubbs said. "That's not to say we have any insight into which way all this goes, but we're just basically telling our accounts they should stay on the sidelines on this stock until we have some clarity."

Separately, WorldCom said Wednesday that its MCI unit was redeeming $700 million of 6.125 percent notes due in 2012.

"WorldCom's decision to retire the notes reflects the company's strong liquidity position and positive free cash flow," WorldCom Chief Financial Officer Scott Sullivan said in a statement. "The repayment of these notes is consistent with our stated objective of reducing overall debt."

WorldCom had $2.2 billion in cash and cash equivalents as of March 31, up from $1.4 billion at Dec. 31, and $30 billion in debt.

On March 11, the company said the SEC requested a range of financial information from WorldCom, including accounting procedures and loans to corporate officers. The accounting probe comes in the wake of similar issues that led to the collapse of energy trader Enron Corp.

The SEC confirmed Wednesday it is investigating the accounting practices of 49 companies.

Specifically, the SEC is probing a $340 million loan WorldCom gave to its CEO, Bernard Ebbers.

Regulators are also questioning whether WorldCom and other telecom carriers improperly inflated revenue by "swapping" network capacity. WorldCom has said it didn't participate in such swaps.