Global Crossing Unexpectedly Replaces CEO
Global Crossing Ltd. unexpectedly replaced its chief executive Thursday after only a year, naming in his place a respected cable executive known for astute deal making and visionary leadership.
Global Crossing Chief Executive Robert Annunziata will be immediately replaced by Leo J. Hindery Jr., who joined the company in December as chairman and chief executive of GlobalCenter Inc., the Sunnyvale, Calif., Internet services business.
Global Crossing also formalized plans Thursday for the spinoff of GlobalCenter into a new tracking stock.
The elevation of Hindery, who is credited with salvaging cable giant Tele-Communications Inc. from financial disaster and selling it last year to AT&T; Corp., could fuel speculation that fast-growing Global Crossing is preparing itself for sale.
Although Global Crossing has been on an acquisition binge since it was formed two years ago, the merger frenzy unfolding in the telecommunications industry has led to speculation that the company will eventually be sold.
Sources close to the company say Deutsche Telekom met with Global executives about six weeks ago as part of a series of exploratory discussions the German phone giant held with various potential targets. But they insisted that conversations went nowhere and rumors of merger talks that ran up both companies’ stocks Thursday were unfounded.
Global Crossing, which is based in Bermuda but has its executive offices in Beverly Hills, owns a growing worldwide communications network and sells space on its fiber lines primarily to major phone and Internet companies.
The management upset is the first high-level shake-up among the crowded top ranks since the company was formed by investor Gary Winnick, the chairman and majority owner. Global Crossing said the split with Annunziata is amicable and that the executive will remain on the board.
But sources said the unexpected move stemmed partly from soured relations between Annunziata and Winnick that grew worse last month when Global Crossing’s stock price fell 14% after losses tripled in the fourth quarter.
Others said Annunziata’s departure also reflects the need for Global Crossing to expand beyond building and operating a vast communications network into an array of unique services for its large corporate customers.
Respected for his entrepreneurial drive and skills as an operator, Annunziata expanded Global Crossing through the acquisitions of Frontier Communications Corp., the U.K.’s Racal Telecom and other telecommunications firms. The company, with 12,000 employees, has $4 billion in revenue, up from about $420 million a year ago.
He joined Global Crossing after a brief stint as president of the business services group at AT&T;, which purchased Teleport Communications Group, a company Annunziata founded.
“My passion is taking small companies and growing them into large companies,” Annunziata, 51, said in a statement. “In the past year, Global Crossing has accomplished what I thought would take three to four years to achieve.”
Global’s expansion makes it a direct competitor with AT&T;, where Annunziata and Hindery met and quickly became allies before leaving within months of each other amid conflicts with the company’s autocratic chief executive, C. Michael Armstrong.
Hindery, an outspoken and charismatic leader, acknowledged that a shift is underway at Global Crossing.
“You’ve got to give Bob a lot of credit for transforming Global Crossing into a much different company than it was when he arrived here,” Hindery said. “In a very short time, we have reached a natural evolution point. . . . Our longer-term strategy will be to have more direct customer relationships.”
Shares of Global Crossing jumped $3.44 to $54.38 on Nasdaq on Thursday, and Deutsche Telekom’s American depositary receipts surged $8.81 to close at $97.06.
News of the management changes and the planned tracking stock came after Thursday’s close.
