Level 3 Integration Aches Continue

Shares of network operator Level 3 Communications Inc. (NYSE: LVLT) fell more than 20 percent after the company reported a wider third-quarter loss and revised its forecast for 2007 and 2008. (See Level 3 Reports Q3.)

For the third quarter, the company posted a net loss of $174 million, or 11 cents a share, on sales of 1.06 billion. That compares with a loss of $138 million, or 12 cents a share, on revenues of $875 million for the year-ago quarter.

While the company slightly beat analyst estimates, it lowered its full-year 2007 adjusted EBITDA forecast to a range of $813 million to $833 million from a previous forecast of $860 million to $920 million. Level 3 also expects 2008 adjusted EBITDA of $950 million to $1.1 billion, which is lower than its previous forecast of $1.15 billion to $1.3 billion.

For the fourth quarter, Level 3 expects sales of $930 million to $950 million.

Level 3 blamed its troubles on the difficulty of integrating acquisitions such as Telcove, ICG, Progress Telecom, and Broadwing.

The company says that each of the companies employed a different provisioning system, which it tried to consolidate through its Project Unity initiative. However, the company says some implementation decisions made achieving its provisioning throughput targets more difficult, which it is trying to correct.

As a result, Level 3 has organized all provisioning authority and responsibility under Neil Hobbs, president of Global Network Services.

The company also appointed Raouf Abdel, president of Business Markets Group, to work with Hobbs and align Level 3's marketing and sales activities with its provisioning capabilities.

This is not the first time Level 3 has blamed integration problems. In the second quarter, the company cited integration issues for weaker-than-expected results. (See Level 3 Feels Integration Irritation and Level 3 Reports Q2.)

Shares of Level 3 plummeted after its earnings report, falling $0.93 (21.53%) to $3.38 in late afternoon trading.

— Ryan Lawler, Reporter, Light Reading

fanfare 12/5/2012 | 3:00:20 PM
re: Level 3 Integration Aches Continue They should have stepped up to the plate on these provisioning issues before now. Putting Neil in charge may be the direction to go ... but it should have been taken during the 2nd Q. Instead, current management allows business execs to "spread their wings" by trying to gain new experiences in carrier networking. They should have had engineers at the plate from the "git-go". If Crowe is so smart, and if he deserves all that new money he so graciously handed himself in his latest raise (huge), then why did 'his' company fall on its face ... and why did he not even know about it until the last few seconds of the game? Didn't Patel tell us last Q that he was sure the company was on track to meet expectations for the year? How inept is that?
materialgirl 12/5/2012 | 3:00:17 PM
re: Level 3 Integration Aches Continue Its even worse than that. They had this grand plan to verticalize provisioning by customer group before they even tried to provision the older centralized way. Then, before they even knew that they could provision, they laid off the guys with the "tribal knowledge" (their words) who knew how to make the whole thing really work.

Now they have a mess of 6 different networks they do not know how to run. The RBOCs must be laughing all the way to the bank. At this point, the guys who got them into this mess are not the ones who will get them out. Crowe is too ivory tower.
fanfare 12/5/2012 | 3:00:10 PM
re: Level 3 Integration Aches Continue Well, I think it's a bit harsh to say they don't know how to run the networks. Now doubt they let the people go who were running things before everyone was trained, but this is not to say that they don't have competent engineers who can bring things in line. You're right ... major screw up ... but if you've got knowledge outlining this as being more than a company who had a sick CEO; the CFO pushed out key personell too soon.... Hey I'd like to hear it. In other words, I can't see any reason why they can't pick up the pieces and fix it. If you've worked in telecom .. you've seen integrations between networks before. It is often tough work .. but it can be done. This looks like growing pains and they dropped the ball .... not much more than that. IF there IS more .. please let us know.
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