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Level 3 Growth 'Will Likely Remain Anemic'

By Craig Galbraith
October 29, 2013 - News

With Level 3 Communications' quarterly earnings announcement pending on Wednesday, at least one analyst isn't too bullish on the company's future – at least in the near term.

Canaccord Genuity's Greg Miller likes the word "anemic." Echoing what he forecast in July after Level 3 reported a slight drop in revenue, Miller today said, " ... we believe that organic revenue growth will likely remain anemic in the near term and positive free cash flow will likely be slow to come as the company attempts to revive its revenue with incremental investments."

Level 3 has been saddled with billions of dollars in debt for years, but managed to cut its loss in the second quarter from $62 million to $24 million – so there are some good signs. It followed that up with an announcement that it would cut 700 jobs – about 6.5 percent of its workforce worldwide – in an attempt to streamline operations and become profitable.

Last quarter also marked the beginning of a new relationship with Starbucks and Google. Level 3 is working with the coffee and search giants to bring faster Wi-Fi connectivity to the Seattle-based retailer's java shops. The Colorado-based CLEC is upgrading existing Wi-Fi devices and is managing in-store connectivity in more than 7,000 company-owned stores across the nation.

“With the help from the Starbucks contract signed in mid Q3 and as the new management team shifts focus from M&A to improving cost structure, we are hopeful that investors might finally start to see some signs of stabilizing operating trends," Miller added.

Follow senior online managing editor @Craig_Galbraith on Twitter.

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