Some day investors will be able to separate the new, good Qwest ( Q) from the old, bad one. But not today.On Thursday, the Denver phone giant
Halting StepsHaving swung to a modest profit from a massive year-ago loss, Qwest was able to point to some solid progress in the latest period. But as with the
Under former CEO Joe Nacchio, Qwest became an aggressive combination of a staid regional phone business once known as U S West and an ambitious national fiber optic network project that was to mesh conventional communications services with next-generation Internet capabilities. To help justify the costs of a vast, state-of-the-art optical network, Qwest and other speculative telcos relied on increasingly creative sales deals. Among the favored practices at the time was the exchange of network capacity -- so-called
swaps -- with other telcos. Qwest had a quirky habit of recording, upfront, all the revenue from these multiyear leases, which involved arguably useless network assets at a time of a widespread capacity glut. Qwest, under its new management team, has since eliminated the swaps and other questionable revenues from its restated financial reports. In February, after tallying up swaps and other questionable revenues, Qwest said it had incorrectly booked $1.33 billion of revenue in 2001 and $889 million in 2000. The restatement cut its actual revenue for 2001 to $18.37 billion and for 2000 to $15.72 billion. "It's hard to know," says Jefferies' Klugman, "until you have audited financials, that every number down to the dollar will remain the same."