Leaving before the job is finished
By Al Lewis, Columnist
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
"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
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
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
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