DENVER—Internet network operator Level 3 Communications Inc. on Tuesday reported a wider loss in the third quarter amid challenges over blending complex operations of at least six businesses it has acquired over the past two years.
The Broomfield-based seller of wholesale Internet services also lowered its guidance for the full year of 2007 and 2008 in wake of the difficulties. Its stock plummeted 24 percent to a 52-week low.
“I’m very disappointed by our performance and I want to personally assure investors that we understand the seriousness of the situation,” Chief Executive Officer James Q. Crowe told analysts during a conference call. “I further want to assure our investors that we are focused on correcting the situation as quickly as we possibly can.”
Janco Partners analyst Donna Jaegers attributed the stock drop to the guidance change, which she said prompted investors to wonder how quickly Level 3 can turn the situation around.
Jaegers is waiting for a new finance chief to be named and to see how the competition reacts to Level 3’s announcement. “If Qwest (Communications International Inc.) steps up the competition, it could get harder for Level 3,” Jaegers said.
Level 3’s integration problems revolve around provisioning, which encompasses the transaction from a sales order to activation of service. Although the newly acquired companies used the same general procedures, each had unique methods of accomplishing the individual steps which complicated the transition into one operation.
Level 3 said it did not increase the capacity enough to handle provisioning so it could meet the previously projected revenue increase.
The results were released a week after Chief Financial Officer Sunit Patel announced he would step down once a replacement is found. Crowe has said he hopes Patel will remain with Level 3 in a different capacity.
In the third quarter, Level 3 reported a loss of $174 million versus a loss of $138 million in the year-ago period. The per-share loss of 11 cents was narrower than the 12 cents reported last year because Level 3’s share count used in calculating the result rose sharply.
Revenue rose 21 percent to $1.06 billion from $875 million in the year-ago quarter.
Its core communications revenue rose 1 percent to $1.04 billion from $1.035 billion in the year-ago quarter.
Analysts surveyed by Thomson Financial had anticipated a loss of 12 cents per share and revenue of $1.04 billion.
The company did not release nine-month results.
Level 3 lowered its full-year 2007 guidance from a range of $860 million to $920 million to a range of $813 million to $833 million. It lowered 2008 guidance from $1.15 billion to $1.3 billion to $950 million to $1.1 billion.
In a related development, Crowe said a follow-up examination showed no recurrence of a benign tumor on his pituitary gland. Crowe underwent surgery for the tumor Aug. 27 and completed follow-up exam Monday. The tumor was initially discovered during a routine physical examination.
Level 3’s stock fell $1.04 to $3.28 a share. In the past year, the share price has ranged from $4.14 a share to $6.80 a share.
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