Broadwing Soars as Huber Goes
Investors seemed downright cheery about the move. Broadwing shares rallied nearly 5 percent, rising $0.43 to $9.28. A visit to the Yahoo Inc. (Nasdaq: YHOO) stock message board for Broadwing, in fact, revealed some virtual high-fives and folks actually saying, "Yahoo!"
"It's never a good sign for you if you're the CEO and the shares rally when you leave," said one Wall Street analyst who covers Broadwing, asking -- pleading, rather -- for anonymity.
Huber is the legendary optical networking guru who founded -- and later fought with -- Ciena Corp. (NYSE: CIEN). In 1997 he started Corvis, which eventually acquired its largest customer, Broadwing. (See The Top 10 Movers and Shakers in Optical Networking and The Optical Future.)
Combined with last year's announced selloff of Corvis's products, Broadwing appears to be moving to shut the door on the Corvis legacy. Broadwing is heading back to its roots as a pure service provider without the baggage of an equipment division.
Corvis was a company packed with promise and controversy from the start, but its all-optical technology never quite lived up to the promise of its spectacular IPO in 2000, in which it attained a valuation in excess of $37 billion, with zero revenues. (See Doctor Huber's Revenge, Life After Corvis, Avici and Corvis Make Stunning Debuts, Corvis's Secret Sauce?, Life After Corvis, A Survey of the Corvis Food Chain, and The David Huber Game.)
Huber invited more controversy by leading Corvis to inside dealings, including the acquisition of Dorsal, an undersea fiber optics firm in which Corvis and Huber both held stakes. (See Corvis Dorsal Deal: A Huber Spin-In?)
Eventually, Huber engineered the takeover of Broadwing. Corvis took the latter's name, put Huber in charge, and angered investors even more by diluting the company's shares in the transaction. (See Corvis & Broadwing: Together At Last and UMTS Forum Waffles in China.)
Huber still retains a substantial stake in the company -- nearly 9 percent, according to recent filings. And he will remain chairman. So he's not going away any time soon.
"I can't imagine Dr. Huber not being actively involved. Broadwing is his baby," says Donovan Dillon, Broadwing's vice president of marketing.
The logic of the change seems simple: Huber is a technology guy who doesn't necessarily know how to run a service provider.
"It was recognized on the part of Dr. Huber and the board that as Broadwing matures in its life cycle as a telecom service provider, the time was right for a new kind of leadership," says Dillon.
"The fact that the company will be run by a real, operational CEO is being welcomed by Wall Street," says another analyst who requested anonymity.
Only one catch: Broadwing hasn't yet found a successor. The company says it's started a search.
Broadwing's top ranks have changed quite a bit lately. President Jim Bannantine exited nine months ago, when Broadwing announced it intended to sell off Corvis's product line, and its COO John McLeod left in October. (See Broadwing to Sell Corvis Business and Broadwing COO Departs .)
Some Wall Street sources say the persistent speculation is that Broadwing is being cleaned up for a sale, with the recent acquisition of WilTel by Level 3 Communications Inc. (NYSE: LVLT) serving as a model. (See Level 3 Takes Out WilTel.)
Broadwing insists the changes don't add up to anything larger. "I would not take those two data points, couple them with this, and extrapolate," Dillon says.
— Craig Matsumoto, Senior Editor, and R. Scott Raynovich, Editor in Chief, Light Reading