Qwest Cuts Jobs, Revenue Forecasts Through 2002
Qwest Communications International Inc. on Monday cut its revenue forecasts through 2002 and said it would cut 4,000 jobs, or 6% of its work force, amid slowing sales in the weak economy.
Analysts said investors were relieved the voice and data services provider had not reduced its outlook further, and its stock jumped nearly 10% to recoup some of its recent losses.
Qwest, which is based in Denver, said it expected 2001 revenue of about $20.5 billion, down from its previous estimate of $21.3 billion to $21.5 billion. It also cut its estimate for cash flow, or earnings before interest, taxes, depreciation and amortization (EBITDA), to $8 billion for 2001 from a range of $8.5 billion to $8.6 billion.
“In the last 30 days, we’ve seen a more severe deterioration in the economy, worse than I think most people expected,” Chief Executive Joseph Nacchio said. “These macroeconomic declines are beginning to be reflected in our growth rates.”
Qwest reported “anemic” growth in telephone access lines, but said the biggest deceleration was in wholesale operations where it sells capacity on its high-speed network to other phone companies or large corporations.
For 2002, Qwest expects sales growth in the high single digits and EBITDA growth slightly better than sales growth. It previously expected 14% to 15% revenue growth and 16% to 17% EBITDA growth.
The stock, which has fallen 43% in the last two months with the general plunge in technology shares, rose $1.76 to close at $19.90 on the New York Stock Exchange.
“We believe the vast majority of investors had already factored in . . . a reduction,” said Credit Suisse First Boston analyst Dan Reingold.
The stock also had been under pressure as investors questioned the quality of the company’s sales mix, and wondered about a jump in accounts receivable, or the money owed by customers.
Qwest said it would cut its work force by 4,000 jobs, to 62,000 from 66,000 employees, by the end of the first quarter of 2002. In a reassignment, it also will eliminate 1,000 staff positions but add 1,000 sales executives to its global business markets unit.
Qwest also cut its capital spending plans for 2001 to $8.5 billion from about $8.8 billion. In 2002, Qwest’s capital budget will be slashed to $5.5 billion from $7.5 billion. As a result, Qwest expects to have positive free-cash flow in the second quarter of 2002, two quarters sooner than previously announced.
Although a severe drop in service prices had hobbled many telephone companies over the last 18 months, Qwest said prices had stabilized and had not triggered its reduced outlook.
