opts for experience over aggressiveness
Some analysts are concerned that Ed Mueller lacks the innovation
needed for growth.
By Andy Vuong. Staff Writer
Monday, August 20, 2007
Qwest's recent selection of Ed Mueller as chairman and chief
executive won praise from analysts focused on steady profits and
free cash flow, but left others wondering if the board of
directors is a bit gun shy.
Instead of picking an aggressive, up-and-coming executive like
Motorola's Greg Brown to take the company to another level, the
board went with a more conservative, old-school
Perhaps the effects of the Joe Nacchio era still exist. Nacchio,
a relentless visionary who nearly ran Qwest into bankruptcy amid
his pursuit of breakneck growth, was sentenced to six years in
prison last month for illegal insider trading.
"Maybe from the board's perspective, they don't want to be
visionary," said Eric Paulak, a Boulder-based telecom analyst
with market research firm Gartner. "They see a nice turnaround
story, they like the steady returns."
"Boards are never content"
Mueller, 60, came as the top choice of his predecessor and
friend, Dick Notebaert, the man credited with leading Qwest's
turnaround but criticized by some for his lack of vision.
"If that's the way they want to continue, fine. It will be a
very conservative chug-along company," Paulak said. "But it's
not going have much growth."
Frank Popoff, Qwest's lead director, scoffed at the notion that
the board is content with the status quo.
"Boards are never content," Popoff said Friday. "We're always
looking for the right balance of growth and operational
"We know that we can't stand still, so we really have to balance
the two options. That's something that Mr. Mueller is looking
at," Popoff said.
Though he doesn't have plans for drastic change, Mueller said
last week he is working on a grand vision for Qwest, but won't
reveal those ideas until the company is ready to execute.
Whatever direction Mueller takes the company, he is in a no-lose
situation, said Pat Comack, an independent telecommunications
"If Qwest turns over, I don't think anybody is going to blame Ed
Mueller," Comack said. "This natural industry evolution
combined with the lack of Qwest's vision -- lack of spending,
especially for video -- has positioned this guy to be trampled
by the cable companies."
Though Mueller has 34 years of telecom experience, he hasn't
worked in the industry since 2002. He was previously CEO of
cookware company Williams-Sonoma.
"The good news is he has a very deep background in
telecommunications. Of course, he's been out of it on a
full-time basis for four or five years," said Lisa Pierce, a
senior analyst with Forrester Research, a market research firm.
"Things have changed since then."
Specifically, phone companies are in a fierce battle with cable
firms to be the all-in-one service provider for residential
customers. Larger Baby Bells AT&T and Verizon are in a better
position to compete with cable because they have cash-generating
wireless arms and are pursuing broad video initiatives.
Denver-based Qwest resells those services through partnerships
with DirecTV and Sprint Nextel.
"DirecTV and Sprint make money on their TV services and their
cellular services, and Qwest just becomes a conduit. They're
not the ones who are making the big profit," Paulak said.
Mueller said Qwest, which provides local phone service in 14
states, will continue its wait-and-see approach on video. He
said the company would be open to acquiring a wireless asset if
it made economic sense.
Saddled with debt
It's tough for Qwest to make a big move on either front because,
despite its financial improvements over the past five years, the
company is still saddled with about $14 billion debt.
An area Qwest could focus on for growth is business services,
leveraging off its nationwide, fiber-optic communications
"This is where he needs to be a bit more visionary," Paulak
said. "This is where he needs to look at making some selective
acquisitions, or some bigger partnerships with large consulting
companies like IBM or Accenture."
Mueller replaced Notebaert on Aug. 10, and the transition has
been "seamless," said Qwest spokesman Nick Sweers.
Mueller will likely spend the next couple of months studying the
company from the top down before making any announcements on
"He's got a honeymoon period. But then there's going to be a
time when he has to make a decision about the company's future,"
Staff writer Andy Vuong can be reached at 303-954-1209 or