Monday, February 16, 2009

L3 Profits

L3 released 4Q08 numbers last week.

Level 3 Communications has recorded its first quarterly profit in six years for the fourth quarter of 2008. The operator reported a $44M profit for the three months to 31 December; although it also reported lower revenue at $1.05 billion for the quarter than it did for the same period in 2007. Level 3 had a $290M net loss for the full year but this was considerably less than the $1.1B loss incurred in 2007. Full year 2008 revenue was $4.3B [about the same as 2007][.telegeographyg]

Even when you hit some numbers, The Street kicks your ass. But when you say, "For 2009, the company said it expects continued revenue weakness over the short term but is also working to cut costs" in Forbes, your stock is taking a hit.

Full disclosure: I rep for 20+ carriers and Level3 happens to be my biggest carrier. Pricing pressures are driving rates down on everything from Transit to Transport. Not everywhere mind you, but in the top 10 Metro areas, where L3 competes with Cogent, HE, and NTT/Verio, it is pressured to lower rates.

XO competes with it in many markets because XO has IRU's on L3's cable, so about 60% of where L3 is, there's XO. Surprisedly, pricing pressure is also coming from Qwest on longhaul routes, especially on Waves. (I rep for XO and Qwest as well, but not Cogent, HE or Verio). But the real competition comes from its own Resellers, like WBS Connect. Lately, Scott's company has gone underwater to take a deal from me, I mean, from L3 directly. I don't know where all this ends but I do expect HE, Cogent, WBS and others to start seeing more bad debt and late payments. The people who fight for price the most are also usually (not always) the ones who pay late. We'll keep watching.

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