Qwest Drops on Weak Strategy Update

Edward Mueller, CEO of Qwest Communications (Q), promised a strategy update (after taking over as CEO in August) by year-end; he delivered one Monday. Investors were unimpressed with his largely unchanged plans for the firm. Coupled with a broad market sell-off, shares fell 4.1% to $6.72. Mueller said the company plans to spend around $1.8 billion on capex in 2008, compared to an expected $1.6B to $1.7B this year, but he didn't provide a financial outlook, instead saying it will come on the firm's analyst day event on Feb. 25.

The bulk of Mueller's strategy is to continue upgrading Qwest's fiber-optic network, while simultaneously cutting costs and improving customer service. Mr. Mueller wouldn't comment on any potential divestitures or acquisitions, but he said Qwest will try to strengthen existing partnerships, such as ones with DirecTV (DTV) and Sprint Nextel (S). He also said he doesn't envision offering an Internet TV service similar to one rivals AT&T (T) and Verizon (VZ) are promoting. Qwest gained back about 1% to $6.79 in after-hours trading.

Sources: Bloomberg, MarketWatch, TheStreet.com, Wall Street Journal
Additional Reading: Qwest's Net Jumps on Tax Benefit; Operating Revenues Disappoint • Qwest Communications Q3 2007 Earnings Call Transcript

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