posts second straight profit
The firm credits cost-cutting and growth in Internet
services amid a drop in phone clients. A stock buyback or
dividend may follow.
By Andy Vuong, Staff Writer
Wednesday, August 2, 2006
Qwest announced Tuesday it was profitable for a second
consecutive quarter, sending its stock price to a level not
reached in more than four years.
The Denver-based phone company said cost cuts and continued
growth in its high-speed Internet business helped offset a
decline in local telephone customers.
The company also said it is considering a stock buyback or a
dividend to reward shareholders. Qwest stock jumped 8
percent to close at $8.40 a share, its highest since March
"Qwest came out with a very solid quarter," said Donna
Jaegers, an analyst with Janco Partners in Denver.
Qwest posted net income of $117 million, 6 cents a share,
during the second quarter on relatively flat revenue of
$3.47 billion. In comparison, the company had a net loss of
$164 million, 9 cents a share, in the second quarter of
Analysts polled by Thomson Financial expected the company to
post earnings of 5 cents a share. While Qwest beat earnings
estimates by a penny, it fell slightly short of analyst
revenue projections of $3.5 billion.
"We booked our second consecutive quarter of profitability,
and we have the opportunity for continued improvement
through the course of the year," Qwest chief executive
Richard Notebaert said.
The company added 120,000 high-speed Internet subscribers in
the quarter, taking its total to 1.8 million, up 51 percent
from a year ago.
Qwest's bundled services -- a package of phone, high-speed
Internet and satellite TV provided by DirecTV -- and
wireless business provided through Sprint also grew during
But its local-telephone access lines continue to decline,
dropping by 5.3 percent to 14.3 million from 15.1 million in
the second quarter a year ago.
Chris King, an analyst with Stifel Nicolaus, said Qwest is
"a declining business without much near-term potential for
revenue growth going forward."
But he had high praise for the turnaround Notebaert has led
since taking the helm in June 2002.
"He's done a great a job righting the ship," King said.
"Just keeping the company out of bankruptcy was a feat in
and of itself, and now to get to the position that they're
in where conceivably they could be paying a dividend or
buying back stock ... is certainly remarkable."
Jim Cramer, host of CNBC's "Mad Money" cable-TV show, said
Tuesday that Notebaert deserves a "congressional medal of
turnaround" and called Qwest the best trade in the market.
Jaeger said Qwest has done well controlling expenses. The
company cut its operating expenses by 6 percent to $3.1
billion during the quarter.
Over the past year, the company shed 3.3 percent of its
workforce. As of June 30, it employed 38,843 people, down
from 40,187 a year ago. It employs about 9,800 in Colorado.
Qwest's workforce increased in the second quarter over the
first quarter after it added 540 call-center jobs as part of
plans to rehire up to 3,000 workers, Notebaert said.
Under a contract Qwest negotiated with its union, the
call-center wages dropped from about $20 an hour to $10 an
hour, though the workers receive full health benefits and
can earn commissions based on sales performance, Notebaert
The company is opening a call center in Utah this week that
will add 600 jobs.
Qwest ended the quarter with a debt load of $15.4 billion,
down $2.2 billion from a year ago.
King said Qwest's stock-price surge may have been helped by
rumors that Verizon may target the company after it was
unable to acquire from Vodafone its 45 percent stake in
Verizon Wireless. King said a Verizon-Qwest marriage is
Staff writer Andy Vuong
can be reached at 303-820-1209 or
Qwest's reported net income during the second quarter,
compared with a net loss of $164 million in the same period
Qwest's revenues in the quarter, when it added 120,000
high-speed Internet customers. It lost about 800,000 local
land-line customers from a year ago.
Qwest's stock price, up 8 percent to its highest level since