(LVLT) - Level 3 Communications Message Board

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Technology Stocks : (LVLT) - Level 3 Communications

LVLT 53.63

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Nov 1 5:00 PM EST

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To: Yogizuna who wrote (2520)	10/19/2000 4:26:18 PM
From: SecularBull	of 3873

JP Morgan on LVLT: Level 3 Communications (BUY) 3Q CORE SERVICE REVENUES FALL SHY BUT NUMBERS FIRM FOR 2000 AND 2001 Highlights: · Ex- $101 million in dark fiber sales, $255 million reported revenue left core services performance shy of forecasts · EBITDA still beat expectations even stripping out non-core revenue in excess of forecasts · Network development continues unabated and on plan · Revenue and EBITDA forecasts remain unchanged though new mix estimates favor subsea transport revenue Level 3 reported financial and operating results for the third quarter yesterday with core communications revenue coming in at $154 million, $15 million short of our estimate for the period. Including dark fiber sales of $101 million, which were $65 million higher than our estimate due to recognition timing differences, the company’s total communications revenue was $255 million versus our $205 million estimate. Total reported revenue including the company’s information services unit, coal mining and other amounted to $341 million against our $281 million forecast. EBITDA for the quarter was a loss of $95 million against our $168 million loss estimate, implying that even if we strip out the dark fiber sales in excess of our estimate and assume a 100% margin on this revenue, consolidated EBITDA still beat our estimate by at least $8 million. Level 3 shares dropped 16% yesterday in part because of disappointment that the company was not able to post stronger growth in its core business lines including bandwidth transport, softswitch services and IP/Colocation. The company reiterated communications service guidance revenue for the year at $825 million with the same $200 million in projected dark fiber sales as has been noted previously. The revenue shortfall across the company’s three core segments is clearly not unrecoverable for a company that will have 400% more network lit in the fourth quarter than it does currently, especially given the prodigious number of product and customer acquisition efforts the company has been announcing. We are keeping our 2000 projections largely unchanged though our fourth quarter calculations have changed substantially to get us there, and our 2001 numbers likewise remain unchanged. On the basis that our financial model is not changing and our conviction that Level 3’s transition from construction to operating company will come into full force in 4Q, we are reiterating our Buy on Level 3 shares.

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