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Optical/IP

Level 3 Tanks on Grim Outlook

Warren Buffett, it seems, is still the man to watch. He bailed out of his Level 3 Communications Inc. (Nasdaq: LVLT) position in a major way last year (see Buffett Sheds Level 3 Shares). Today the operator saw its share price plummet $0.62 (11.05%) to $4.99 in opening trading, as it warned of a significant dent in its expected 2004 revenues.

While the operator cut losses and increased sequential revenues in the fourth quarter (see Level 3 Cuts Q4 Losses), it warned that a decline in revenues from its managed modem business in 2004 would cut annual revenues by up to $150 million. An expected reduction in dialup capacity sales to AOL would account for the majority of this.

The carrier also noted that it would be unlikely to notice any significant impact from new services until late in 2004.

Level 3 recorded fourth quarter revenues of $988 million and a net loss of $121 million, compared with $874 million in revenues and a net loss of $247 million in the previous quarter. For 2003, revenues were $4.03 billion, compared with $3.11 billion in 2002, while net loss was $711 million, compared with $858 million.

Bizarrely, $80 million of the year's sales came from a coal mining business, but that's another sector on the decline, as 2002's revenues from the raw energy unit were $114 million.

The carrier has launched a number of new services in past months (see Level 3 Launches Field Support Service , Level 3 Offers Toll Free VOIP, Level 3 Expands VOIP Service, and Level 3 Offers Private Line Service) as it seeks to transform its business. This year, the company will launch wholesale residential VOIP during the first half to make better use of its proprietary softswitch platform that, according to Level 3, can reach 93 percent of the U.S. population. It also plans to provide IP VPNs with QOS capabilities on a wholesale basis.

— Ray Le Maistre, International Editor, Boardwatch

capolite 12/5/2012 | 2:30:22 AM
re: Level 3 Tanks on Grim Outlook Level 3 has completely failed AOL as a supposed strategic vendor. The managed modem business was an admitted opportunistic sideline for Level 3 while their customer base caught up to the "vision" behind the creation of Level 3. Now Level 3 chose to cherry pick near term revenue rather than act as a strategic trusted advisor, AOl has lost over 2 million subscribers to other broadband ISP's, and Level 3 has been consumed by it's own silicon economics.
Level 3 has a lot of high priced talent only going through the motions and mouthing the opportunistic vision of the week.
cyber_techy 12/5/2012 | 2:30:21 AM
re: Level 3 Tanks on Grim Outlook Anything you say, BobbyMax
jane_doe 12/5/2012 | 2:29:59 AM
re: Level 3 Tanks on Grim Outlook The below is absolutely true.
Level 3 Management knew how to spend money to engineer and build a fiber network, from their experience at MFS DataNet days. Level 3 management is lucky to have lasted as long as they have. What business accomplishments has level 3 really made? None.
.......
Level 3 has completely failed AOL as a supposed strategic vendor. The managed modem business was an admitted opportunistic sideline for Level 3 while their customer base caught up to the "vision" behind the creation of Level 3. Now Level 3 chose to cherry pick near term revenue rather than act as a strategic trusted advisor, AOl has lost over 2 million subscribers to other broadband ISP's, and Level 3 has been consumed by it's own silicon economics.
Level 3 has a lot of high priced talent only going through the motions and mouthing the opportunistic vision of the week.
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