Level 3 Communications (NYSE:LVLT, news, filings) wasted little time picking a successor to James Crowe, who announced his intention to leave the company by the end of 2013 just last month. Today the company named Jeff Storey as both CEO and President effective immediately, elevating him from his previous role as COO and President. He now takes over responsibility for proving the company’s growth model going forward.
Crowe had led Level 3 since its creation back in the dot-com boom, through the telecom nuclear winter, and on to the consolidation of much of the country’s alternative fiber under one roof. The industry is a vastly different place than it was 15 years ago, and Level 3 is a much larger company that faces entirely different challenges than it did just a few years back.
Jeff Storey takes the helm at a moment when sustainable positive free cash flow is at hand, the debt load is manageable, and positive earnings per share are within sight (though not here just yet!) It will be interesting to see where he takes the company from here. Perhaps the first question will be who takes over as COO. Hmm….
Storey has also been nominated to the board of directors, while Crowe will not stand for re-election. That begs the question, what will James Q. Crowe do next? He will surely resurface somewhere before long. FCC Chairman perhaps? Haha, just kidding AT&T… mostly.
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Good riddance!
Congrats to the board on their expediency and their choice. With the company besting organic revenue growth estimates for the first time in years (5 years?? ever??) and a rapidly changing industry environment it seemed like an important time to have your strategic footing in hand.
While the allure of an outsider held promise, I think the combination of removing JC from the board as well as its emphasis in the PR of, “revenues, fcf and enterprise” is a win for stakeholders which I am one.
I wouldn’t go picking up your pom-poms just yet.
who do you think has been making virtually every operating decision over the last 5 years?
This is a win for the arrogant legacy Broomfield group, not the shareholders or other stakeholders.
Someone needed to come in and take a plow through that Stepford zone to break the spell on the disturbing group-think zombies that roam its halls. Instead they gave the job to its lead architect.
cheers
that must have been some executive search. once again the Level 3 board has demonstrated that they’re as incompetent as the boobs they have running it.
maybe the search team were turned down by the candidates they sought…
Well…i was wrong. i did not agree w/ Rob that Storey would be the eventual pick. I honestly felt it would have been done earlier if it was going to be him so i admit i was wrong. I have to say while i am a little surprised i did not think this was outside the possibilty. Time will tell if he adds value or if the board is proven wrong and should have gone externally.
I m glad that this should make for an effective transition. No need at all for Crowe to stick around and help with the transition and no ongoing influence as a Board member.
Storey will know exactly who he wants to keep and who he doesn’t and one would expect this all to happen over the next months as Storey taps any preferred replacements and brings them over.
It is going to be interesting what it will mean to have a company whose single-minded focus is on free cash flow generation. We will get to see which investment priorities have been about high growth and which have been about world domination in 2050. In some ways Storey will be able to ride some tailwinds, but he deserves to have the wind at his back and I think the owners made the right decision to announce Crowe’s ousting when they did – it was a necessary reassurance to investors that endless can-kicking-down-road would not be tolerated any longer. Missing guidance after reaffirming – and then creating a spurious reason for the miss – was unacceptable.
That reassurance, together with the credibility Storey has already built up through the (so far) on-track integration, creates a good starting environment for Storey. He has the opportunity to change the way analysts and investors see Level 3 from the perspective of credibility. His first quarterly call will be in two weeks – the timing couldn’t be better.
Good luck Level 3.
Storey “will know exactly who he wants to keep and who he doesn’t” because he either hired them, promoted them or hasn’t fired them over the last five years.
Those he didn’t hire or control over the last five years, e.g., CFO and General Counsel, are unlikely to change unless they don’t like him. In the case of Sunit, perhaps the world’s greatest (debt) juggler who could have his own circle in the Ringling Bros and Barnum & Bailey Circus if this LVLT thing doesn’t work out, it’s highly unlikely Storey will make any change. As for general counsel, who cares. This isn’t the tobacco or finance industry.
As for changing the way analysts and investors see Level 3, Storey’s been talking to analysts and investors since he arrived participating at investor conferences and on analyst calls.
The above-referenced “can-kicking…” and guidance misses were based on forecasts that Storey played a critical role in creating in the first place.
Bottom line: The incompetent Level 3 board squandered an amazing opportunity to find an outsider that could chart a fresh course for a very stale company. Instead they selected day old bread. Let’s hope it’s only stale and not moldy also.
I have to agree with those above who highlight the incompetence of the Crowe regime. As a former insider, I was amazed that when merging the Global Crossing and Level 3 entities, given the choice of a 25 year veteran Media executive coming in from GC, they chose a Level3 person who had been selling wholesale minutes to carriers to Run their Media and Content Division….I was clear that what was most important at Level3 was not who was best for the job but who was the best political operator…
its widely rumored that the search committee contacted several sitting and or available CEO’s like Carl Grivner at Pacnet and the feedback is that culture prevents an outsider from coming in and being successful. The BOD is not willing to hire an aggressive and or necessary change agent to drive the required changes so promoting from within with storey is not at all surprising.
http://www.investorvillage.com/smbd.asp?mb=444&mn=118209&pt=msg&mid=12709020
There’s only one conclusion to draw after reviewing the LVLT proxy
http://www.sec.gov/Archives/edgar/data/794323/000104746913004265/a2214235zdef14a.htm (page 47)
When it comes to executive compensation, BIGGER IS BETTER, as in bigger company better executive compensation. By adding Global Crossing to LVLT Mr. Storey and other Named Executive Offices (NEOs) saw salaries increase by 15% but more importantly bonuses (NOT INCLUDING STOCK AWARDS) grow 200%-300%. (AT LVLT bonuses are much bigger than salaries for NEOs)
For example Storey’s 2010 bonus was $506k. His 2011 bonus, $1.5m and 2012 bonus $1.15m.
On Dec 31, 2009 LVLT stock was at $22.95. On Dec 31st, 2012 LVLT stock was at $23.11. In that period LVLT gained 2.71% (and that’s not annualized). Meanwhile the S&P 500 during the same period was up 28% and Nasdaq during the same period was up 33%.
Mr. Storey’s bonus tripled between 2010 and 2011 from $500k to $1.5m because they bought a big company. In 2012 even though targets were missed he still enjoyed a $1.1m bonus (2x his 2010 bonus) because he was managing a bigger company.
Make no mistake about it, executives love acquiring big companies because total compensation skyrockets
This is hardly a LVLT problem, it is a corporate america problem. But LVLT executives (and board members) certainly do their part to maintain the cause. Nice job!