Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Qwest Communications (Q) (formerly QWST) -- Ignore unavailable to you. Want to Upgrade?

To: JJB who wrote (6834)	12/6/2003 6:49:56 PM
From: Kal Perry	Read Replies (1) \| Respond to of 6846

Qwest shareholders on a quest (from Dec 6, 2003 St. Paul Pioneer Press) twincities.com Just in case you'll be missing that long-delayed annual meeting of Qwest Communications International set for Dec. 16 in Denver, here's a cheat sheet. The meeting promises to be a barnburner, with Qwest facing an unusually high number of minority shareholder proposals for a company its size — seven of them. In each of the previous two years, there were only two. But Qwest is special. The company, by far Minnesota's largest provider of telecommunications services, has accumulated an unusually high number of very angry shareholders. Their wrath is understandable. On March 10, 2000, the day the Nasdaq Composite peaked at just over 5,000, Qwest stock also hit its high — $55.86 a share. Since then, the stock has traded for as little as $1.36. This year, it's done little despite the rebound of many other technology-related stocks. On Friday, it closed at $3.56. "Qwest is sort of a poster child — it's like AOL," says Kevin Cameron, a managing director at San Francisco-based Glass Lewis & Co., which advises institutional investors on how to vote their shares at annual meetings. America Online — just like Qwest when it acquired the former US Westin mid-2000 — used the bloated value of its stock as currency to buy Time Warner just as the frenzy over dot-com and telecom stocks reached its wildest and craziest moments. Since then, the stocks of both merged companies have crashed. Cameron explains that today, many investors rank the Qwest-US West deal behind only the AOL-Time Warner transaction as an egregious example of a bubble-era merger gone awry. In a 17-page analysis of the proposals to be voted on at the annual meeting, Glass Lewis flunks Qwest for paying its top five officers significantly more than their peers at comparable firms. This occurred even though Qwest performed notably worse than the other firms, a Glass Lewis analysis shows. Nelson Phelps, executive director of the Association of US West Retirees, attributes this year's wave of shareholder resolutions at Qwest to two factors: • First, the negative press coverage Qwest has attracted, which reflects the many bad things that have happened at the company since the merger. • Second, the ongoing anger of investors over the questionable actions of the management led by former Qwest CEO Joe Nacchio. Nacchio left the company under a cloud in mid-2002, but a raft of investigations and litigation continues to hang over the company. The retirees have been very unhappy campers since Sept. 2, when Qwest sent letters advising that their health care benefits would be slashed effective Jan. 1. "They feel betrayed," says Phelps. In June 2002, Nacchio convened the Denver-based company's annual meeting in remote Dublin, Ohio, far from Qwest's primary service area and its major clusters of stockholders. Then he delivered the news that the company was dropping its quarterly dividend. Qwest's new management has re-audited old financial statements and admitted to overbooking $2.5 billion in revenue. Delay over the revisions forced Qwest to push back its 2003 annual meeting by six months. The new management, led by former Ameritech CEO Richard Notebaert, has done much to clean up the turmoil of the merger and the mess left by Nacchio. But Glass Lewis' Cameron thinks Notebaert slipped up by not insisting on a more independent board when he came to Qwest. A resolution calling for such a board could stir sharp debate at this month's meeting. Opposing parties are at odds over how to define independence. Two retiree association members, Howard Rickman of Beaverton, Ore., and Eldon Graham of Bellevue, Wash., want a substantial majority of Qwest directors to be independent. Rickman and Graham say eight of Qwest's 12 directors are not independent. They argue that three of the eight represent directly the interests of founder Philip Anschutz, Qwest's largest shareholder and its chairman until June 2002. They also say that four more outside directors, including 3M board member Linda Alvarado, have significant business ties with Qwest. Qwest opposes their resolution. It contends the company is in compliance with rules proposed earlier by the New York Stock Exchange that require the board to "consist predominantly of independent directors." Glass Lewis backs the two shareholders' proposal. The proxy advisory firm also opposes the company's two proposals: One that would keep on the board the three directors up for re-election at the meeting: Notebaert, Anschutz and former Dow Chemical CEO Frank Popoff; the other would amend an employee stock-purchase plan. Glass Lewis notes that last year, Qwest granted Nacchio a monthly consulting fee of $125,000 payable until June, plus severance benefits that include a lump sum payment of $10.5 million. These benefits were approved even though Qwest engaged in questionable accounting and business practices under Nacchio that are still being investigated by the Securities and Exchange Commission. Three more shareholder proposals would restrict performance-based stock options and require Qwest to report options as an expense on its income statement. Management opposes all three. Another three would bar the company from reporting any impact on its net income of projected returns on employee pension assets; require that all directors be elected at once rather than at staggered intervals; and require shareholder approval for future severance packages such as the one Nacchio landed. The company backs all of three of the latter proposals. Its support for them was a pleasant surprise for many shareholders. That just goes to show you that at least parts of Qwest's 2003 annual shareholder meeting will be in harmony with the good cheer so appropriate for the holiday season