Level 3 Communications said Thursday it will sell its software arm for $287 million in cash, a move that will give it about $1.2 billion in cash that could be used for future acquisitions.
The Broomfield-based fiber-optic network company, which counts industry giants such as AT&T and AOL among its customers, is selling Dallas-based Software Spectrum to Insight Enterprises of Tempe, Ariz.
Since October, Level 3 has bought five regional network companies around the United States. Analysts have said the company was looking for other regional Internet network providers to buy, possibly AboveNet Inc. of White Plains, N.Y., or XO Communications of Reston, Va., which has a Denver office.
“Proceeds from the sale of Software Spectrum will increase Level 3’s ability to pursue those opportunities that are more central to our communication business,” vice chairman Charles Miller III said in a statement Thursday.
The Software Spectrum sale, which is expected to close in the third quarter, will increase Level 3’s cash to $1.207 billion.
In addition to looking for more acquisitions, Level 3 is beefing up its capital spending to get its network to more customers, said Donna Jaegers, a telecommunication analyst at Greenwood Village-based Janco Partners.
There’s plenty of room for investment, since only about 13 percent of the buildings in the United States are connected by fiber-optic cable, Jaegers said. Fiber is seen as one of the best ways to offer the Internet speeds needed to download large video, picture and sound files.
“Capital spending for Level 3 next year we estimate will be between $450 million and $550 million,” Jaegers said. “When you’re in the local (network) business, you have to grow links in the ground to buildings and the customers.”
She estimates Level 3’s capital spending this year at between $350 million and $500 million.
In 2002, Level 3 bought software resellers Software Spectrum and Corporate Software for a combined $261 million.
Insight provides information- technology products and service. It does not have its own Internet network.
“We’ll be in much more of a leadership position with the broadest set of capabilities and presence,” said Rich Fennessy, president and chief executive of Insight Enterprises.
Level 3 spokesman Chris Hardman declined to comment on the sale beyond a press statement issued by the company.
Staff writer Beth Potter can be reached at 303-820-1503 or bpotter@denverpost.com.
