The sale is part of the troubled telecom company's effort to rid itself of nonessential operations--and shows just how far it had strayed beyond the telecommunications industry.
"Qwest, like other telcos in the late '90s, wanted other lines of business to diversify. They felt those other lines of businesses would help them," said Jeff Halpern, a Bernstein analyst. "I think we'll see more of these types of spinoffs in the future from telcos."
Qwest, which inherited the business in 1999 via itsof Icon CMT, had opted to continue running the online pharmaceutical marketing business for the next four years, rather than sell it.
But Qwest, which recently reported a widening third-quarter net loss and a need to restate its 2001 and 2000 financial results, has been busy divesting its nonessential assets. The company sold its applications services business, Qwest Cyber Solutions, in August and, earlier this month, began the first phase of its $7 billion sale of its directories business,.
In this latest deal, Qwest sold the online pharmaceutical business to a group of senior Qwest managers for an undisclosed cash sum. The business will now be called Cadient.
"When we were part of Qwest, people could never understand what Qwest was doing in the online pharmaceutical marketing business," said Bob Weissman, president of Cadient. "If they didn't know us by our former name, they would look at us strangely when we said we were with Qwest. We'd say, 'We're an online marketing company,' and they'd say, 'I thought you were in the phone business.'"
Though Qwest's involvement in online pharmaceutical marketing may strike some as a bit left field, Halpern noted it doesn't hold a candle to WorldCom. The telecom giant, which is trying tounder bankruptcy protection, may soon be looking for ways to unload its 51 percent stake in a yacht builder. WorldCom inherited its stake from former Chief Executive Bernard Ebbers, who is looking for ways to repay a $408 million personal loan WorldCom had given him. The former CEO also used a Canadian cattle ranch as collateral on the loan.
"At least with Qwest, you won't end up having to sell any cattle ranches," Halpern joked.
The telecom company is continuing to evaluate other nonessential businesses to sell, but none remains in its portfolio that would be considered as removed from the telecommunications industry as Cadient, said Claire Maledon, a Qwest spokeswoman.