Cable Tech

Qwest's Notebaert: It Can Be Fixed

In a conference call featuring new CEO Richard C. Notebaert, Qwest Communications International Inc.'s (NYSE: Q) management today hinted at plans for some quick moves to shore up business. Notebaert, the former Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) CEO, replaced Joseph Nacchio as head honcho yesterday (see Notebaert Takes Out Nacchio).

Notebaert’s optimism on this morning’s call may have prompted the continuing climb in share prices today. Qwest’s new CEO not only insisted that he has faith in the telecom industry, but also said that he thinks Qwest will survive its current financial woes.

Following the news yesterday, the company’s shares rose more than 20 percent, trading at $4.99 at closing. And today, following a conference call in which Notebaert indicated that his taking over as CEO was just the beginning of the changes at the company, Qwest’s shares jumped an additional 2.8 percent, closing at $5.14 today.

"[Notebaert] ensures a quicker return to credibility for Qwest," says James E. Ott, an analyst with Hibernia Southcoast Capital, pointing out that such issues as the Securities and Exchange Commission (SEC) investigation into the company’s accounting practices are linked closely to former CEO Nacchio. "[With him gone] it gives them a clean slate."

Most of Notebaert's comments amounted to cheerleading, with only a few business details discussed. It was clear his goal was primarily to calm nerves by assuring investors that the industry and company would recover.

"When I look at the industry, the human need to communicate is not slowing down," he said, pointing out that he himself has a T1 line into his home. "I can’t imagine going back to modem... I think we have a tremendous opportunity."

When he was asked how quickly he hoped Qwest would reach breakeven on its balance sheet, he answered, "Breakeven isn’t good enough... We’re going to move very expeditiously on this."

So what changes does Qwest have in store? In the wake of Nacchio’s official resignation on Sunday (see Qwest: Ciao Nacchio?), Notebaert wouldn’t go into details about more high-level management changes at the company. However, while he said that any such speculation would be premature, he certainly didn’t rule out the possibility of changes. "In every job I’ve gone into, there’ve been changes," he said, pointing out that both resignations and dismissals from management positions are not uncommon.

Frank Popoff, a Qwest board member and chairman of the compensation committee, who was also on this morning's call, insisted that Nacchio and the board together had reached the decision that it was time for him to leave, and that the timing had nothing to do with such events as the attempted sale of the company's yellow pages directory business. "The board and Joe reached a common decision that it was time for change," he said.

Loaded down with approximately $27 billion in debt, Qwest desperately needs the more than $8 billion it expects to get from the directory sale (see Qwest Posts Loss, Preps Asset Sales). On the call, Notebaert, who was a 30-year veteran of Ameritech before he joined Tellabs, said that the company was still in discussions with parties interested in the entire business, but that the directory unit would probably be sold in two separate transactions. This would help the company avoid any potential regulatory problems and, more importantly, accelerate the sales process.

"The process takes time," he said, pointing out that reaching a mutually agreed timeline with one or two potential buyers was his main concern.

Notebaert also stated that he and other top executives at the company would start assessing Qwest's assets outside of the U.S. in the first half of next week, and that he anticipated some modifications. He wouldn't give any further details.

In the U.S., Qwest’s new CEO indicated that the company might shift its focus more towards consumers and small and medium-sized businesses, but insisted that it wouldn’t forget about its large corporate customers either. "That is something that we would never put at risk," he said.

Speculation has it that Notebaert has been brought in to prepare all or parts of Qwest for sale, but the new boss didn't say anything to that affect. Some investors had been hoping the company would soon sell off its unprofitable long distance service and concentrate on the stable, USWest part of the business; they were probably disappointed today when Notebaert declined to distinguish between the two parts at all.

"I look at Qwest as a whole," he said. "To me that merger was two years ago… There’s only one Qwest."

— Eugénie Larson, Reporter, Light Reading
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scooby 12/4/2012 | 10:14:41 PM
re: Qwest's Notebaert: It Can Be Fixed If Qwest had a DNR on file this fire drill would be unnecessary. We'd just let the paramedics put the defibrillator back in the van. But noooooooo.

DarkHelmet 12/4/2012 | 10:14:11 PM
re: Qwest's Notebaert: It Can Be Fixed I don't understand the seemingly positive reaction the stock market has had to the arrival of Notebaert. The only thing he has shown the ability to do in the past is hack apart a company, and destroy the employee morale. The resulting companies (Ameritech/Tellabs) have been unable to attract new customers or offer new services/products essentially because these functions require personnel who have been whacked because they don't produce revenue in the short term. His cuts at Tellabs were so deep that they had to buy a company which merely implemented off-the-shelf technology which Tellabs was already intimately familiar, but unable to develop because of loss of staff.

The only people who possible benefit are the bond holders, who now have a chance to be paid. The stock holders will now see a company which languishes for years, holding onto its monopoly services, but unable to grow. Its the ultimate in pushing the ratio of risk/reward: when you cut so deep that there is no risk, but you have no potential for reward.

As a final note, its hard to imagine worse customer service than the current Qwest, but the world will now get a taste.

neo78_us 12/4/2012 | 10:13:42 PM
re: Qwest's Notebaert: It Can Be Fixed is this a good time to invest in Qwest? base on their access lines and the amount of debt, the company is still trading at a significant discount.. what do you guys think?
skeptic 12/4/2012 | 10:13:41 PM
re: Qwest's Notebaert: It Can Be Fixed is this a good time to invest in Qwest? base on their access lines and the amount of debt, the company is still trading at a significant discount.. what do you guys think?

I think its a crazy time to be investing in
any of these companies. There is no sign
(overall) that we have hit bottom yet. To know
that something is undervalued, you have to have
a reference point (unvervalued as compared to

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