After nearly three years away from the C-suite, Smith takes the reins at Zayo

BOULDER — Steve Smith was once the chief executive of a dominant, rapidly growing data-infrastructure company before a sudden resignation took him out of the driver’s seat.

Now, after spending almost three years in the investment world, he has been tasked to lead Zayo Group Holdings Inc. into a new chapter of its life.

Smith had his first day as the bandwidth-infrastructure company’s CEO Monday, replacing co-founder and former CEO Dan Caruso.

Speaking with BizWest this week, Smith said he’s expecting to take the next 90 days to settle in and learn the businesses within the Boulder-based company while living more than 1,200 miles away.

He lives near Stanford University and will work remotely through the rest of the pandemic and his daughter’s wedding next spring before moving to Boulder in the mid-to-late summer of 2021.

From private equity back into the driver’s seat

Before being appointed CEO, Smith was a managing director at San Francisco-based private-equity firm GI Partners, focusing on data infrastructure rounds. Prior to that, he was CEO of data-center operator Equinix Inc. (Nasdaq: EQIX) and frequently spoke with Caruso as a customer and a colleague within the industry.

He had spoken with Caruso intermittently about potentially stepping down, but Smith’s candidacy gained momentum in the past two to three months after Zayo’s investment-firm owners took an interest in him.

“I think when the company went private this year, Dan had just decided that at some point, he would like to step down,” Smith said.

Caruso is remaining with Zayo as a board member.

A successful past marred by resignation

Equinix made its mark building and investing in “neutral” data centers where different networks could share data for one another. These neutral points are what allow people who subscribe to different Internet service providers or content providers to connect with others not specifically within that ISP or provider.

Smith’s tenure was meteoric for the company. He took the company from making $419 million in 2007 to $4.36 billion a decade later.

However, he resigned from Equinix in 2018 due to what the company said was “poor judgment with respect to an employee matter.”

The exact nature of that incident has never publicly surfaced. 

Charles Meyers, Smith’s replacement as CEO, did not specify what exactly happened when speaking to CNBC months after Smith’s departure.

“I addressed the team last week and talked about the culture and our commitment to that culture, and my commitment as CEO to make sure that every employee in our company can confidently say, ‘I’m safe, I belong and I matter,’” he said.

Smith declined to talk to BizWest about the reasoning behind his departure, saying that he was under a non-disclosure agreement.

However, he dismissed the notion that the mystery surrounding his past would be a liability for him and the company moving forward. He also said Zayo’s ownership and board asked him about the incident during his pre-hire vetting process, as well as his colleagues from his prior private-equity job.

“I’ve been in the industry a long, long time, and everybody knows me,” he said. “It’s just an issue to protect the people who are involved, and it’s nothing that is going to affect how I’m going to perform or what the company does.”

Positioning for a “new world” with a narrow focus

Smith’s mandate from the board and investors is to drive growth, but the newly private Zayo’s approach is different from what it traditionally has done.

In its early years, Zayo’s strategy was to acquire “orphan networks” of broadband operators across the country and consolidate them into a larger network. Over the past decade or so, it acquired upward of 40 providers in search of that scale.

But in recent weeks, Zayo announced plans to sell its co-location business as part of a winnowing of its focus back toward its core roots in bandwidth infrastructure.

Smith said that’s part of the investment thesis used by EQT and Digital Colony, in part to drive organic growth heavily from its existing customer base and from global expansion.

Zayo is also trying to position itself in the middle of the next generation of cloud-computing and the anticipated rollout of the 5G network protocol across the U.S. and elsewhere in the world.

Smith anticipates a hybrid working environment after the pandemic ends, where employees will split their time working from home and in an office, something he believes will require a major shift in how dense network infrastructure will be in the future.

Those factors combined lead him to believe that Zayo is positioned to be a major player in those shifts.

“We couldn’t be in a better place as a business model,” he said.

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