Qwest: Last call for Notebaert?
Outgoing CEO announces sixth straight profit, leaves door open
for another job
By Andy Vuong, Staff Writer
Thursday, August 2, 2007
Retiring Qwest chief executive Dick Notebaert said Wednesday he
expects the board of directors to announce his successor "very
soon," and left the door open for taking another corporate job
at some point.
"My expectation -- again, it's a personal expectation -- is that
(naming a replacement) will happen very soon ... sooner rather
than later," Notebaert said during an earnings call with
Notebaert reiterated in an interview that his immediate plan
after leaving Qwest is to spend time with his five grandsons,
chair the University of Notre Dame's board of trustees and serve
on a couple of outside company boards.
But he indicated circumstances could change and declined to say
whether he has been contacted by Schaumburg, Ill.-based
Motorola, which reportedly may view Notebaert as a possible
candidate to replace embattled CEO Ed Zander.
"If you look out into the future and you say, 'What would you do
a year from now,' I don't know," said Notebaert. "But my
current plan is to do what I just said. And I don't have any
Notebaert, 60, said in June that he plans to move back to his
native Wisconsin to be closer to his family. He has deep ties
in the Midwest, having led Chicago-based phone company Ameritech
for five years before moving to Denver.
Notebaert replaced Joe Nacchio as Qwest's CEO in June 2002,
taking the reins of a scandal-plagued company that was on the
brink of bankruptcy.
Notebaert returned the Denver-based communications company to
financial stability by focusing on cost cuts, customer service
and high-speed-Internet growth.
He said Wednesday's conference call announcing Qwest's sixth
consecutive quarterly profit is expected to be his last with the
Qwest posted net income of $246 million, or 13 cents a share,
compared with $117 million, or 6 cents a share, during the same
quarter a year ago. It had revenue of $3.46 billion, down
slightly from $3.47 billion a year ago.
"The numbers were better than we expected, but we have concerns
about how much further on the cost-cutting side they can go as
they're trying to be competitive in the marketplace," said Todd
Rosenbluth, a telecom equity analyst with Standard & Poor's.
"While we think Mr. Notebaert has done an admirable job, the
future direction of the company is uncertain and creates risks."
The company's stock price is down 18 percent from when Notebaert
announced his retirement plans June 11. It fell 13 cents
Wednesday to close at $8.40.
Though Qwest's second-quarter results beat Rosenbluth's
expectations, they fell short of consensus analyst estimates.
Analysts polled by Reuters Estimates expected the company to
post a profit of 14 cents a share on revenue of $3.475 billion.
Amid growing competition from cable companies offering
Internet-based phone service, Qwest continues to suffer declines
in land-line customers. The company's total access lines fell
7.1 percent, with a 6.9 percent drop in residential lines.
"Comcast is hitting them aggressively," said Donna Jaegers, an
analyst with Janco Partners.
Qwest cut operating expenses by 4.2 percent, helping offset the
losses in phone customers.
The company also added 100,000 subscribers to its broadband
Internet service. The growth, however, fell short of analyst
expectations. Deutsche Bank analyst Greg Miller forecast
130,000 new subscribers.
Qwest ended the quarter with $1.1 billion in cash and short-term
investments and $14.5 billion in debt. The company said it is
on target to generate free cash flow of up to $1.8 billion for
Qwest, which is halfway done with a $2 billion share-buyback
program announced last October, is considering rewarding
shareholders again, possibly with a cash dividend.
The company also said in a regulatory filing that it believes
the Justice Department's criminal "investigation of us is
complete." The investigation resulted in the
illegal-insider-trading conviction of Nacchio, who was sentenced
Friday to six years in prison.
Qwest footed the bill for Nacchio's criminal defense, as
required by his contract and the company's bylaws. Qwest is
also paying for Nacchio's defense against civil suits.
Notebaert said if it were up to him, he wouldn't disclose how
much that has cost the company.
"That's up to my successor, but I wouldn't. I don't think
there's any value in doing that," Notebaert said.
Qwest, which offers local phone service in 14 states and
operates a nationwide fiber-optic communications network,
employs 37,585 people, including about 9,000 in Colorado.
Staff writer Andy Vuong can be reached at 303-954-1209 or