I took profits awhile ago :( , but still follow this space.
Fwiw, Nacchio is speaking on a panel ("See the Light", moderated by Joe Noel) at the H&Q Comm Symposium tomorrow at 11:15-12:30 (PST). Also on panel are CEO of E-TEK, CEO of Lightwave and VP of Uniphase telecom products.
And here's the article:
Qwest For Fiber: CEO Builds Telecom Network, Lights Up Stk
By Shawn Young
NEW YORK (Dow Jones)--After a 27-year career at AT&T Corp. (T), Joseph Nacchio, now president and chief executive of Qwest Communications International Inc. (QWST), is having more fun building a maze than he had being in one.
The former chief of AT&T's $26 billion-a-year consumer business has gone to the dark fiber side, running Qwest as it builds a high-profile telecommunications network based on Internet technology.
Qwest is one of a handful of companies poised to become a major threat to traditional companies like Nacchio's alma mater as they use Internet protocols to design high-speed, low-cost networks that can carry dizzying amounts of data along with plain old phone calls.
When completed next year, Qwest's $2 billion fiber-optic network will link about 125 cities that generate roughly 80% of the voice and data traffic in the U.S. It also will reach into Mexico and Britain.
The company, which went public June 30 and has left the low of 26 3/8 it set that day far behind, has been a runaway hit with investors. The shares reached their high of 74 on Monday, the date of record for a 2-for-1 stock split on Feb. 24. Recently, the shares were up 1/2, or 0.7%, at 73 5/8 on volume of 196,900, compared with average daily volume of 258,400.
Skeptics say the heavily leveraged company is wildly overvalued, and they question its promise of unmatched cost-effectiveness, but investors don't seem to be worried.
"From a Wall Street perspective, Qwest has incredible sex appeal," said Joseph Noel, analyst at Hambrecht & Quist Inc.
The company offers investors an enticing combination of technical innovation, marketing savvy and a blue-chip management team, he said.
Nacchio, 47, became the leader of that team at the end of 1996 after he clashed with John R. Walter during Walter's brief stint as president of AT&T.
Nacchio was recruited by oil billionaire Philip Anschutz, Qwest founder and chairman, who still owns 84% of the company.
"He is the consummate entrepreneur," said Nacchio, who contrasted Anschutz's entrepreneurial focus with the ponderous style of AT&T.
Moving from one of the nation's biggest, most bureaucratic corporations to a company that wasn't even public when he took over was a bit mind-boggling, Nacchio concedes.
"What was really different was the emotional change," he said. "I was schlepping on a commercial aircraft instead of a corporate jet. I could actually see everybody who works for me at one meeting."
It wasn't only scale that was different, it was politics - or the relative lack of it - Nacchio said.
"Large companies always strive for collegiality, but the reality is a lot of infighting," he said. "I didn't realize how much unnecessary stress there was until after I'd left AT&T."
Having landed happily on his feet, Nacchio said, "I think there is a God."
Qwest, headquartered in Denver, isn't the only company set to cash in on the high capacity and low prices that high-tech communications networks can deliver. IXC Communications Inc. (IIXC) and Williams Cos. (WMB) are at work on fiber-optic routes, as is a new company called Level 3 Communications, a subsidiary of Peter Kiewit Sons' Inc., a private company based in Omaha, Neb.
By the time it is finished, Qwest's 16,000-mile network won't be unique, skeptics say, nor will it be the largest of its kind. With all the companies working on networks, some worry there will be a glut of wholesale capacity.
Not likely, said Merrill Lynch & Co. analyst Daniel Reingold. "As each day passes, I'm astounded at the growth" in demand, Reingold said. "The unleashing of a huge pent-up demand is possible."
With Nacchio and other top-notch retail executives at the helm, Qwest is seen as uniquely suited to be a retailer, as well as a wholesaler, of cutting-edge communications services, analysts said.
Retail, said Reingold, "could add a new leg to the business." It's clearly one of the directions the company is taking.
Until recently, Qwest focused mainly on selling space on its network to other companies, but now full-page ads in major publications promote the network's speed and capacity, which are sufficient to shoot every annual report in the history of the New York Stock Exchange across the country in 1.45 seconds.
In a few days, Qwest will begin offering consumers and small businesses willing to dial extra numbers long-distance service at 7.5 cents a minute regardless of when the call is placed. The service could be available in as many as 25 cities by midsummer, Nacchio said.
The calls will go over Qwest's network; they won't be sent over the public Internet.
The voice calls will be like hitchhikers getting picked up on a network designed to carry data. The network doesn't need to distinguish between voice and data.
"You effectively make the network stupid," said Noel of Hambrecht & Quist. "It's all bits."
Qwest, and perhaps WorldCom Inc. (WCOM), have been the first to respond on a grand scale to this technological change, Noel said.
"The sheer amount of bandwidth they (Qwest) are throwing at the telecom equation is just mind-boggling," Noel said.
Nacchio sees Qwest's network as revolutionary.
"We will not only change the design of networks, we're going to change the whole cost structure of the industry," he said.
Given the network's efficiency, 7.5 cents a minute for a long-distance call isn't all that low a rate, analysts said. Nacchio isn't arguing.
"It isn't like we're squeezing our cash flow to make this happen," Nacchio said.
And it isn't like competitors are letting the challenge go unmet.
Telephone titan AT&T recently unveiled its own foray into Internet-based phone service, promising customers of its WorldNet service prepaid long-distance at 7.5 to 9 cents a minute. AT&T will begin trials of the service in the second quarter.
Qwest and AT&T both say their services won't have the quality problems that have been a stumbling block to Internet telephony thus far.
They had better not, because their prices are close enough to the best deals on regular long-distance calls that consumers won't think it's worthwhile to put up with poor quality, said Herbert Tinger, analyst at First Albany Corp.
MCI Communications Corp. (MCIC) offers consumer rates as low as 5 cents a minute on Sundays.
Cheap long-distance service will be a big part of the initial appeal of Internet-protocol networks like Qwest's, Tinger said, but the ultimate selling point will be their ability to handle a variety of services, including video and images along with voice and data.
Qwest is preparing for both the bargain-hunting small customer and the bandwidth-gobbling commercial account.
Last month, the company added 288 crucial miles of fiber-optic capacity between New York and Boston to its network and announced plans to acquire Phoenix Network Inc. (PHX), a Golden, Colo., long-distance reseller that will bring Qwest about 40,000 business customers and $75 million in revenue.
Qwest, which saw third-quarter revenue jump to $188.9 million from $44.3 million a year ago, may not stop with the network it now has planned.
The network is laid out mainly along railroad rights-of-way, and the current design uses only a little more than half of the 30,000 miles of rights-of-way to which Qwest could have access. The company might also be able to line up many additional miles, Nacchio said.
The company said in a recent federal filing that it might consider expanding in the Pacific Northwest.
"We will build more," said Nacchio. "We are constantly looking for opportunities." |
