Only two weeks after appointing a new chairman, Cable & Wireless (NYSE: CWP) has announced that its current CEO Graham Wallace is stepping down and will leave when a replacement is found (see C&W Brings in Lapthorne and C&W Dumps CEO).

The announcement should surprise no one. Wallace, in the hot seat since February 1999, has come under increasing pressure from investors to quit his post following the carrier's disastrous financial performance over the past 18 to 24 months. With its share price hovering around the 66 pence mark on the London Stock Exchange today, the company is currently valued at about £1.5 billion (US$2.41 billion). That's down from the £37 billion ($59.46 billion at today's exchange rate) at which it was valued in March 2000.

Until he leaves, Wallace has day-to-day control, with particular emphasis on "cost reduction programmes." Well, if someone's going to be unpopular for making dramatic cuts within a company, it may as well be the guy who's leaving.

Now, with announcements about management changes and a refocus of the business out of the way (see C&W Shuffles Managers and C&W Plans Global Reorg), C&W is seeking someone new to stabilize things. Company spokesman Peter Eustace tells us there is no fixed timescale for appointing the new CEO, and that the company will not comment on who has or has not -- or even who might, or might not -- be approached. There is also no comment concerning the matter of Wallace's severance package.

So what is a struggling international operator to do when it needs a new warm body at the helm? Former chief executive of C&W's global operations, Mike McTighe, can see two clear options. "If they don't appoint Duncan Lewis, then I think it will be someone from outside the telecom sector," he tells Light Reading. "Lewis would be well received internally, and he has thrown his hat into the ring -- but then he has thrown his hat into the ring for a number of things. He likes to keep his options open, does Duncan... But Lapthorne [the new chairman] is not an industry guy, and if they have any sense, the company will appoint someone from outside telecom. That is what happened in the end with Energis plc." (See Chelys Buys Energis's UK Biz.)

Lewis, a former C&W executive and most recently CEO of now defunct pan-European carrier GTS/Ebone, had been considered a leading candidate for the chairman's seat (see Will Lewis Return to C&W?).He was not prepared to talk about the new opening: "No comment" was his only contribution to the discussion.

McTighe rules himself out of the equation. "I am having a ball doing what I am doing, with a lot lower profile and a lot less stress." Having spent two-and-a-half years at C&W (March 1999 to September 2001), he took the reigns at pan-European operator Carrier1 when it was already on its knees. It went bankrupt early last year (see Carrier1 Goes Bankrupt). He is now an advisor to venture capitalist Apax Partners; on the board of directors at settlement systems firm Enition and pan-European ISP Via Net.works; and is non-executive chairman at enterprise-class wireless equipment vendor Red-M.

McTighe also discounts the idea that Lucy Woods, who quit her job as head of European operations at WorldCom Inc. (OTC: WCOEQ) earlier this month, could be Wallace's successor. "I haven't heard Lucy's name mentioned. I think she would be a bit lightweight for that role, although she does have the sort of financial background that would be suitable."

While C&W may look for someone outside the industry, a seasoned telecom executive who agreed to comment only on the promise of anonymity, says that might not be the wisest option. "I think they'll look outside the industry, but that may be a mistake. Telecom is a very complex business, and they really need someone who knows the industry and how it works. Look at the torrid time John Pluthero [retail and consumer ISP background] is having at Energis. C&W's challenge is to find a telecom person who has a proven commercial track record," says our secret squirrel.

As for C&W's future strategy, McTighe believes the carrier needs to redevelop its business rather than go for the quick sale. "To get real value for its assets at this point would be very difficult, and if they sold anything now it would only be the assets that underpin the company. It needs to operate its way out of its current situation."

— Ray Le Maistre, European Editor, Unstrung