Broadband services

Gardner's Departure a Cautionary Tale

The abrupt change of leadership at the top of Windstream appears to be a response to the recent financial struggles of a company that seemed determined to innovate its way out of its traditional staid telecom role. (See Windstream Names Thomas CEO, Gardner Resigns.)

Jeff Gardner, who resigned this week, has headed Windstream Communications Inc. (Nasdaq: WIN) since its creation in 2006 and was leading the company through a transition to more of a business services play with a broader -- if not quite national -- footprint of cloud services and interconnected data centers. In addition, he was a big proponent of the company's strategy to spin off its network assets into a REIT (real estate investment trust) so that the network could be operated separately from the services business. (See Is Windstream Boldly Setting a New Trend? and REIT Bandwagon May Be Small.)

It was a strategy that impressed some analysts -- such as Motley Fool's Anders Bylund -- but apparently wasn't enough to satisfy Windstream's board of directors when the company's third-quarter results missed analysts' expectations and triggered a stock price drop of almost 10%.

In announcing his resignation, Gardner said in a statement that he and the board agreed that "a change in perspective is needed in order to accelerate the pace of change within the company and to more effectively respond to the rapidly evolving needs of our customers."

It's a bit hard for me to imagine how Windstream will accelerate change going forward under new CEO Tony Thomas -- the former Windstream CFO who had been tapped to head the REIT -- but I'll be interested to see that happen.

In the past year alone, Windstream -- in addition to launching the REIT strategy -- has purchased a broadband wireless company focused on business services, launched a new pay-TV service, created new customer portals for its carrier and cloud services, created its first national DWDM network, expanded its long-haul 100G network, and expanded to almost 30 data centers nationwide with a focused regional cloud services strategy.

In short, this was not a company that was standing still. If anything, its pace of change within the last year was as fast as any of its telecom brethren, yet apparently not fast enough to save the CEO's job.

So either Thomas has to really put the pedal to the metal going forward, or "pace of change" is a cliché used to disguise what really prompted Gardner's resignation.

Here's a look at our coverage of Windstream's activity this year:

— Carol Wilson, Editor-at-Large, Light Reading

Page 1 / 2   >   >>
Joe Stanganelli 12/22/2014 | 7:27:15 AM
Re: Get your eye off the ticker Right you are.  I heard the term "change control" the other day at a conference -- as an apparent buzzterm for risk aversion to innovation.  Funny.
mendyk 12/15/2014 | 10:02:53 AM
Re: Get your eye off the ticker "Pace of change" is a change of pace (sorry -- it was there for the taking) from the usual "spend more time with the family" or "pursue other opportunities."
cnwedit 12/15/2014 | 9:51:37 AM
Re: Get your eye off the ticker Yeah, that was part of my later speculation, that the integration of Paetec - for example - wasn't producing the results expected or that the REIT strategy wasn't creating the tax advantages expected. 

I just found it weird that "pace of change" was their catch phrase reason for Gardner's leaving. 
mendyk 12/15/2014 | 9:48:53 AM
Re: Get your eye off the ticker Not that corporate parting statements have any real meaning, but there is a difference between "change" and "innovation." Drastic spending cuts fall into the former. I'm not saying that's the case here, but it's a possibility.
cnwedit 12/15/2014 | 8:13:06 AM
Re: Get your eye off the ticker Joe, 

I get your gist on the "one bad quarter" comment and I also agree overall that the near-term focus on investor value and stock price has undermined long-term planning for the telecom industry.

Joe Stanganelli 12/15/2014 | 12:23:24 AM
Re: Get your eye off the ticker @Carol: Not so much a reaction to "one bad quarter," but even multiple less-than-satisfactory quarters.

While the CEO's job is to increase value for shareholders, s/he should not attempt to do so by way of mortgaging the future.  It's why, for instance, the banking industry took such a big hit in the wake of the '08 crash -- at least, those financial institutions that were publicly traded; privately owned financial institutions fared much better in the following couple of years because they were not trying to appease shareholders by chasing the very risky investments that caused the crash.
Joe Stanganelli 12/14/2014 | 11:40:59 PM
Re: Get your eye off the ticker At this point, I'm wondering if public companies would be better served by having a parallel CEO or dual CEO roles -- one for long-term planning and the the overall health of the company, and the other for dedicated to IR and pumping up stock prices.
cnwedit 12/14/2014 | 3:21:54 PM
Re: Get your eye off the ticker Daniel, 

That's certainly one explanation - that the board got an attack of the cautions. But why then say Gardner left so they could accelerate the pace of change?

It's also possible the Paetec integration isn't going as hoped or producting the results expected. A lot of things are possible, including, as others have indicated, the possibility this is a knee-jerk reaction to one bad quarter. 

The latter doesn't seem that likely for a board that approved major spending on acquisitions and expansion in recent months. 

So as you say, we'll just have to see this one play out. 
danielcawrey 12/13/2014 | 6:55:07 PM
Re: Get your eye off the ticker Interesting development. It seemed almost as though the company was doing a lot of different things, and now the artbiter of that is now gone. Maybe these new initiatives are just not going as swimmingly as some would have hoped. Will be good to keep watch on this. 
mendyk 12/13/2014 | 9:18:43 AM
Re: Get your eye off the ticker This goes to the heart of the real cultural issue that stunts innovation: the fact that most if not all companies are managed for very short-term results. Not only is success measured in share price for public companies, but also CXOs are rewarded largely based on that metric. It's not a situation that's limited to telecom. Look too far ahead, and you can easily end up deciding to "pursue other opportunities" or "spend more time with the family."
Page 1 / 2   >   >>
Sign In