Qwest Communications International (NYSE: Q) is moving lower today after the telecom firm pulled its long-distance phone network off the auction block. The company was attempting to sell its long-distance assets to help generate cash, but reports indicate that bids for the unit were unacceptably low.
Last week, The Wall Street Journal (subscription required) reported that bids for the unit came in below $1 billion, citing sources familiar with the matter. Qwest, which has a debt load of $560 million maturing in 2009, was seeking $2 billion to $3 billion for the business.
Qwest wasn't quite as specific as the Journal in its press release this morning. "Although there was significant interest in this process from prospective buyers, the company and its Board of Directors have determined that the long distance network asset holds far more value to Qwest shareholders and is more strategically important to Qwest and its customers than is the alternative of pursuing a transaction," stated the company.
Q tumbled more than 4% in the wake of the news, and as of this writing it is trading just below $4 per share. This region is home to the stock's 10-week moving average, which has provided technical support since late November 2008.
Short sellers are likely cheering the stock's drop, as these bearish speculators have been ramping up their bets on Qwest. Short interest on the shares rose by 20.4% during the most recent reporting period, and now accounts for 4.4% of the equity's available float. If any of these skeptics are tempted to take profits today, the resulting buying pressure could help Q battle back from its lows of the session.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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