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Ethernet services

CenturyLink Posts Lackluster Q2

CenturyLink continued to underperform, falling short of analyst expectations on multiple fronts in the second quarter, as sales of its newer strategic services failed to make up for continued downturn in legacy voice and data sales revenues.

CenturyLink Inc. (NYSE: CTL) reported net income of three cents per share and adjusted net income of 46 cents per share, below the analyst estimate of 49 cents per share cited by multiple sources.

The glimmer of hope held up by Glen F. Post, III, CenturyLink chief executive officer and president, is that the company had a very positive June, and expects its merger with Level 3 Communications Inc. (NYSE: LVLT) to offer major new opportunities, particularly given the combined company's scale and international network footprint.

CenturyLink posted revenues of $4.09 billion, down 7% year-over-year, and that included a 6% drop in strategic sales and a 10% drop in legacy revenues. In its enterprise segment, revenues dropped 9% year-over-year to $2.22 billion. But some of that was attributed to the sale of its collocation business, as well as legacy sales slides. When special items are excluded, enterprise strategic sales grew 4%.

Post pointed to a slight increase in sales of enterprise high-bandwidth data services as an indication of things to come. Those sales rose about 1% to $760 million and they represent the services businesses are buying to replace legacy data private line offerings.

"The rate of revenue conversion from MPLS sales is shortening as we convert mid-range customer orders into real revenues because our provisioning time is shorter," Post commented to analysts on the second-quarter earnings call. "We had a very strong June, and we expect a very solid third quarter going forward. We should start to see sales numbers improve and we expect strategic revenues also will improve."

Replacing legacy revenues on both the consumer and business fronts remains a challenge for many operators and CenturyLink seems to be the poster child for this issue. The company has been ramping up its business product offerings -- its Cloud Application Management service and Managed Security Services offerings are selling well, officials said -- but the firm has missed earnings expectations for the last three quarters, weighed down by legacy sales losses.

— Carol Wilson, Editor-at-Large, Light Reading

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