DENVER—Level 3 Communications Inc., an Internet network provider struggling to integrate a host of acquisitions, caught investors off-guard Monday by announcing the resignation of co-founder Kevin O’Hara as president and chief operating officer.
The company also said it halted a five-month search for a new finance chief and will retain Sunit Patel in that position.
Its stock closed down 14 percent to a 52-week low of $1.87 a share.
“Kevin O’Hara has worked closely with me for more than 20 years and this was obviously a difficult decision for both of us,” Chief Executive Officer Jim Crowe said in a statement. “At this time, however, Kevin and I have agreed that a different perspective will be of benefit to our company.”
Crowe and Neil Hobbs, an executive vice president for sales and network services, will assume O’Hara’s responsibilities effective immediately. As part of the changes, Hobbs has been named executive vice president of operations, a new position.
Janco Partners analyst Donna Jaegers, who tracks Level 3, said the announcement was surprising but noted the problems Level 3 has had came in areas under O’Hara’s supervision. “I think these management changes are constructive,” she said.
Level 3’s problems have stemmed from its recent acquisitions of at least seven companies and being able to integrate provisioning, which encompasses the transaction from a sales order to service activation.
Although the acquired companies used the same general procedures, each had unique methods of accomplishing the individual steps which complicated the transition.
Crowe said Monday they have made progress toward boosting sales and service installation rates.
Patel was seen as one of the key executives keeping Level 3 running during the buying spree. He announced in October he would resign when a replacement was found. At the time, Crowe said he hoped to convince Patel to remain with the company in a different role.
Last month, Level 3 reported its fourth-quarter net loss narrowed to $91 million, or 6 cents a share, from $174 million, or 11 cents a share, in the year-ago quarter.
Level 3’s stock fell 31 cents, or 14 percent, to close at $1.87 a share.
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