AUSWR
The Association of U S West Retirees
 

 

 

Leaving before the job is finished
By Al Lewis, Columnist
Denver Post
Tuesday, June 12, 2007

Qwest was a $5 stock when Dick Notebaert replaced disgraced CEO Joe Nacchio in June 2002.

It may soon be a $5 stock again.

Upon news of Notebaert's resignation, Qwest stock lost nearly 8 percent of it value Monday, closing at $9.36.  As Qwest stock slumped, Notebaert patted himself on the back for a job well done.

"I would not walk away if I didn't feel the legacy that I left behind was very strong," he said at a Bear Sterns investor conference in New York on Monday.

Notebaert's chief contribution to Qwest has been averting bankruptcy after a telecom-industry implosion and an accounting scandal under Nacchio.

He has been deservedly well-paid for leading this recovery -- bagging more than $100 million over five years.  But Notebaert is leaving before the job is finished.

"If he's turned Qwest around, and it's on such a nice track, why wouldn't he want to stay and harvest more profit from it?" said analyst Donna Jaegers of Denver-based Janco Partners.  "I think tough times are ahead for Qwest."

Notebaert, 59, told Qwest employees in an e-mail:  "I made this decision based on family and personal commitments to volunteerism, which are an extension, in my views, of our Spirit of Service." 

It's the old "time with family/personal reasons" line embellished with Qwest's jingo.  Who leaves a job that pays millions of dollars a year for this?

Qwest executive vice president Barry Allen, 58, has announced plans to spend more time with his family.  So has former CFO Oren Shaffer, 65.  "This is the third time I've retired," Shaffer said in March.  "I think my wife would sincerely hope that it's the last time."

This dubious rhetoric signals to the market that Notebaert and his crew have bagged all there is to bag.  That is hardly shocking, considering why they were hired -- to replace Nacchio, who now awaits sentencing on insider-trading charges, and to save shareholder's equity from the ravages of bankruptcy.

"Dick Notebaert was the Gerald Ford of Qwest, after the dark and brooding, Nixionian Nacchio," said Tom Friedberg, a former Denver-based telecom analyst.

When Notebaert was first hired, my colleagues joked that his slogan should be "I'm not Joe."  By not being Joe, Notebaert brought Qwest the credibility it needed to refinance and pare its massive debts.  By not being Joe, Notebaert reinvigorated Qwest's demoralized ranks.  By not being Joe, Notebaert was able to slice as he smiled about the "Spirit of Service."

All the blame for Qwest's woes went to Nacchio.  And if Notebaert had failed in steering Qwest clear of bankruptcy, that would have been Nacchio's fault, too.

A $2.5 billion accounting restatement gave Notebaert a lower base from which to build his success story.

Under Notebaert, some segments of Qwest's business grew -- particularly high-speed Internet -- but Qwest's annual revenues ($13.9 billion in 2006) didn't.

Notebaert has returned Qwest to profitability, but he's done it by restructuring debt and cutting costs.  He cut capital expenditures;  he cut jobs;  he cut benefits.

Qwest now has a better balance sheet, but strategically it is not much better off than it was before Nacchio took over in 2000.

Not that Notebaert didn't try.  In 2005, Notebaert made a hostile bid for MCI.  When that failed, he promised to reposition Qwest through smaller acquisitions of lesser-known companies.

Last year, Qwest struck a $107 million deal to purchase Austin, Texas-based OnFiber Communications.  But otherwise, Notebaert has been outmaneuvered on the acquisition front by deal-happy Level 3 Communications in Broomfield.

So Qwest remains with too much debt to be acquired, too little capital to be a serious acquirer and no serious growth prospects.  It could soon become fodder for a private-equity buyer that will really wield the hatchets.

Still, Notebaert has done a fine job for the man who hired him, Denver billionaire Phil Anschutz.  Earlier this year, Anschutz entered a contract to unload the last of his Qwest shares.  All told, Anschutz has made more than $3 billion from his once-troubled investment in Qwest.

Now that Anschutz is out, Notebaert can leave.  And Qwest is ready for the next crew.  I can't wait to see who they are and what they do to this company.

Al Lewis' column appears Sundays, Tuesdays and Fridays.  Respond to him at denverpostbloghouse.com/lewis, 303-954-1967 or alewis@denverpost.com.

http://www.denverpost.com/business/ci_6116934