Level 3 Communications’ new chief executive officer told shareholders Thursday that his goals include a focus on per-share results, especially free cash flow, for the fiber optic network firm that has yet to make an annual profit in 15 years of operations as a publicly traded company.
Shareholders had critical questions during the company’s annual meeting for Jeff Storey, who was promoted to CEO in April after founding CEO James Crowe retired. Storey had served as the company’s president and chief operating officer since 2008.
Storey also said he would focus on growing the company’s current revenue streams, eliminate wasteful expenses and improve the firm’s credit profile.
The Broomfield, Colo. company was originally Kiewit Diversified Group, founded in Omaha as a holding company for the nonconstruction assets of Peter Kiewit Sons’ Inc. The firm moved to Colorado and shifted focus to telecommunications networks, changing its name in 1998 and going public, drawing heavy investment from Omaha residents.
But the firm’s stock has lost 98 percent of its value, shareholder Don Pollard of Omaha said, including a 1-for-15 reverse stock split in 2011.
Pollard asked Storey at the meeting, broadcast online, why the company is a “laggard” in its content delivery network business, part of its “core network services.” Pollard said revenue growth not counting acquisitions hasn’t been on par with what the firm’s competitors have seen.
“What are you doing to correct this situation?” he asked.
In response, Storey said he was trying to grow the business by shifting the company’s focus from a wholesale provider to serving the day-to-day network needs of large business customers.
“From a ‘revenue per bit’ perspective, those customers are more attractive,” he said.
“The networks and connectivity is still the core value,” Storey said, but the company can “layer other products and services on top of that.”
Enterprise customers now make up two-thirds of revenue, board chairman Walter Scott, Jr. said in a letter to shareholders. Those customers include multinational firms needing large amounts of bandwidth such as banks, health care providers, content providers and search engines.
The company said one of its largest sources of future demand for core network services will be from customers that distribute video and other bandwidth-hungry content online.
Pollard, who traveled to Colorado for the meeting, said afterward that he’s been hearing that for years, and is growing tired of waiting.
“It’s supposed to be a growth story, but today there is no growth story,” he said. “A lot of shareholders, with a large base being in Omaha, are not satisfied with what they’re doing.”
The stock closed its first day of trading at $74.25, on April 1, 1998. Its current 52-week high is $25.26 and 52-week low is $16.36 — a big drop considering the reverse stock split.
Pollard questioned Crowe’s total 2012 compensation of $40.7 million, significantly higher than his 2011 earnings of $11.3 million or his $6.4 million in 2010.
Board member Michael Mahoney, a private investor and chairman of the compensation committee, said the pay resulted from a three-year contract put in place in 2012 because of an acquisition. Total stock awards for the contract were all awarded in 2012.
Storey said he has an optimistic outlook: “From a business perspective, I believe Level 3 has everything we need to be successful. It’s up to us to execute.”
Also at Thursday’s meeting, shareholders approved the election of 14 men to one-year terms on the board of directors: Scott; Storey; Mahoney; Retired U.S. Air Force Gen. Kevin P. Chilton; Retired U.S. Navy Admiral Archie R. Clemins, president of Caribou Technologies; Steven T. Clontz, formerly a member of the executive committee of Level 3 acquisition Global Crossing; Retired U.S. Navy Admiral James O. Ellis Jr.; T. Michael Glenn, an executive vice president for FedEx; former Level 3 chief financial officer Richard R. Jaros; vice chairman Charles C. Miller III; private investor John T. Reed; Peter Seah Lim Huat, former vice chairman of Global Crossing; Peter van Oppen, of Trilogy Partnership investment firm; and retired Colorado State University president Dr. Albert C. Yates.
The board did not nominate Crowe for election.
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