Broomfield – Fiber-optic network operator Level 3 Communications Inc. said today its losses nearly tripled in the second quarter to $188 million, as its stock fell 6 percent despite beating the consensus estimate of Wall Street.
Revenue for the quarter was $910 million, down from $918 million in the second quarter last year.
The company had a net loss of $188 million, or 27 cents per share, compared with the loss of $63 million, or 9 cents per share, in the same quarter a year ago, when the company recorded a one-time gain of $146 million.
The consensus estimate of analysts surveyed by Thomson First Call was a loss of 31 cents per share.
Level 3’s shares fell 14 cents to close at $2.07 today on the Nasdaq Stock Market. In the past year, the price has ranged from $1.55 to $4.27.
Revenue from information services increased 3 percent to $520 million, while revenue from the communications division fell 5 percent to $371 million. Part of the drop came after the company’s single largest voice termination customer decided to roll most of its traffic off Level 3’s network, executives said.
Voice over Internet protocol, or VoIP, calling services is one of the company’s expected growth areas.
The communications revenue still topped the company’s projections issued April 26 of between $350 million and $370 million.
“We exceeded our revenue projections this quarter primarily as a result of growth in our core transport and IP businesses and higher reciprocal compensation,” CEO James Q. Crowe said. “The growth in our core services came primarily from continued customer demand as well as our continued focus on pricing discipline, which is proving beneficial to us.” Janco Partners research analyst Donna Jaegers said she was concerned about Level 3’s cash burn and the change in business from the voice termination customer.
The company also said it expected to spend $20 million more than planned after Electronic Data Systems Corp. selected Level 3’s Software Spectrum to support a U.S. Navy contract.
Chief financial officer Sunit Patel called the one-year, $40 million contract profitable and said there were options to renew it.
“Right now Level 3 seems to spending and spending and spending and not getting a return,” Jaegers said. “This wasn’t expected to be a great quarter, but the signs are troubling.” Level 3 said it expected communications revenue to fall to $345 million to $365 million in the third quarter, as it feels the effects of the expiration of a DSL aggregation contract with Verizon Communications Inc.
It expected a 4 to 7 percent drop in communications revenue for the full year.
