The profitable quarter, reported Feb. 11, exceeded analysts’ expectations and marks a first for Level 3 in a long time. The Broomfield, Colo.-based carrier has been under the microscope for continued quarterly losses, debt troubles and provisioning problems stemming from its 2006 M&A frenzy.
But Level 3 appears to be turning those frowns upside down.
To wit, in the fourth quarter of 2008, the company earned $44 million – that’s compared to a loss of $91 million in the same period a year earlier, and the even higher losses of $120 million just six months ago. The numbers were buoyed by Level 3’s ability to reduce its near-term debt and boost its cash reserves. CFO Sunit Patel said the company expects to pay all of its remaining 2009 and 2010 debt with cash on hand. Overall, that’s quite a turnaround.
Still, Level 3, like everyone else, is feeling the effects of the recession. Its fourth-quarter sales fell somewhat – from $1.07 billion to $1.05 billion – as customers reduced their spending. Patel said the cutbacks are most evident among wholesale and enterprise users; Level 3’s European revenue also has been stung by recent weakness in pound sterling rates.
Nonetheless, executives say they plan to maintain Level 3’s new momentum by spending less on capex in ’09 than in ’08. That might or might not include more layoffs – Level 3 last year axed 450 jobs.
Level 3’s stock was up about 3 percent in early afternoon trading, at $1.03.