& cplSiteName &

Level 3 Shares Dip on Warning

Light Reading
News Analysis
Light Reading
6/18/2001

Adding to a growing sense of unease about the core fiber backbone business, Level 3 Communications Inc. (Nasdaq: LVLT) announced Monday morning that it would layoff 1,400 workers, or 23.7 percent of its workforce.

These cost reductions are part of a larger plan to trim $2.3 billion by 2003, according to the company. Level 3 officials also said that it would focus on selling to established customers rather than newer ones. The company reported that roughly 20 percent of its revenue base is at risk, due to the possibility that customers will be unable to pay their bills. Concurrent with its first-quarter earnings release, Level 3 was forced to write-down a part of their backlog due to lingering concerns over customer credit worthiness.

Along with announcing workforce reductions, Level 3 revised guidance for 2001, saying that it now expects to lose $7.50 per share versus previous forecasts of $7.25 per share. In midday trading, shares of Level 3 were down 1.21 (16%) to $6.41.

The news confirms the growing suspicion that Level 3's long-term financial health is being threatened, as losses mount. In a report on "The New Carrier Landscape," issued earlier this month by The Optical Oracle, Light Reading's subscription research service, Level 3 ranked last in financial and technology positioning in an assessment of 14 leading carriers (see Carriers at Risk) .

This morning, other analysts voiced their concerns about the company.

In a research note to clients, Merrill Lynch & Co. Inc. analyst Adam Quinton wrote, “Disaggregation of the industry simply isn’t materializing fast enough and to a degree consistent with Level 3’s business plan and is effectively going into reverse as smaller webcentric and communications intensive business models continue to fail through lack of funding.”

Quinton believes that lengthening selling cycles for basic transport services is what's forced Level 3 to reduce revenue estimates for the second time in two months, while announcing drastic cost-cutting measures. Citing the concerns above, Quinton lowered both his intermediate and long-term ratings to Neutral.

— Christopher P. Bulkey, Financial Analyst, Light Reading http://www.lightreading.com

Editor's Note: Light Reading is not affiliated with Oracle Corporation.

(3)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
cfaller
cfaller
12/4/2012 | 8:13:31 PM
re: Level 3 Shares Dip on Warning
Level 3 is toast, and it's not just 'market conditions' that are killing them. I have to wonder, what took so long?

1. Poor marketing: when Jim Crowe went to Wall Street to get funding, he talked about providing services to the enterprise market. Currently they remain stuck in the wholesale marketplace, which is unattractive due to the shakeout.
2. Poor sales efforts: because they were in the wholesale arena, a lot of their sales force competed on price, and ended up selling at 50, 60, 70% discounts to market rates, and often sold below their cost.
3. Poor provisioning: I heard rumors of 6 month intervals for DS-x circuits, mainly because it was all offnet.
4. Poor engineering: has their softswitching product worked yet? And even if it has, are customers really interested in shaving their voice rates from $.05/min to $.04/min?

Level 3 going bankrupt will be good for the industry. Kind of like GST and E.spire...
flanker
flanker
12/4/2012 | 8:13:29 PM
re: Level 3 Shares Dip on Warning
Disaggregation of the industry...

-----simply isnGÇÖt materializing fast enough,

----and (is) to a degree consistent with Level 3GÇÖs business plan,

-----and is effectively going into reverse as smaller webcentric and communications intensive business models ---- continue to fail through lack of funding.

flanker
flanker
12/4/2012 | 8:13:29 PM
re: Level 3 Shares Dip on Warning
GÇ£Disaggregation of the industry simply isnGÇÖt materializing fast enough and to a degree consistent with Level 3GÇÖs business plan and is effectively going into reverse as smaller webcentric and communications intensive business models continue to fail through lack of funding.GÇ¥

What sort of crap is this? There are 39 words, 8 nouns and 4 verbs in this sentence. His sentiments may be right be damned if he understands the language let alone the industry.


Featured Video
Upcoming Live Events
October 22, 2019, Los Angeles, CA
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events