A White Knight Steps Down

Qwest Communications said it was losing another C.E.O. today.

The good news? This time around, there's no insider trading involved, and the current officeholder will be able to stick around until his successor is on board.

The bad news? Richard Notebaert's earlyish retirement (isn't 59 the new 39?) might suggest that the telecom industry veteran considers Qwest a lost cause. The stock fell almost 5 percent this morning.

Back in 2002 Notebaert swooped in as the white knight to Joseph Nacchio's dragon, rescuing what remained of Qwest after federal prosecutors accused Nacchio of inflating the company's stock price and defrauding shareholders for billions. Nacchio got rich, got nabbed, and in April got convicted on 19 counts of insider trading.

In the past five years, Notebaert has put the beleaguered telecom company back in the black. He's reduced debt, reversed accounting failures, and nursed the company back to good enough financial health to allow for healthy dividends and share repurchases.

But there's only so far good management can go if the business is inherently flawed. Qwest is the weakest and smallest of the "baby bells" and as long-distance service is dying as a business, the company is not positioned in the wireless market or to compete with cable companies' "triple play" offerings for wired service. Analysts have long been saying that given these limitations, Qwest will have to merge or acquire to survive.

Notebaert made a bold attempted to acquire wireless provider MCI, but the bid failed in 2005. With the acquisition option out the window, Notebaert has been trolling Wall Street trying to drum up a buyer for Qwest, but has been met by little interested. The company's heavy debt load combined with limited growth potential aren't the best selling points.

So if Notebaert's bee-line to the golf course is a sign that he's crying "uncle," what lies ahead for Qwest?

by Liz Gunnison