Level 3 Dn 8%;Fund Manager Doubts Cash Position-Barron's
By Lingling Wei
Of DOW JONES NEWSWIRES
NEW YORK -- Shares of Level 3 Communications Inc. (LVLT) slid by as much as 11% Monday, approaching its 52-week low, after a telecommunications fund manager cast doubt about its cash position in the latest issue of Barron's.
Commenting on the broadband telecom market, Robert Gensler, the manager of the $768 million Media & Telecommunications Fund, said in Barron's that both Level 3 and Williams Communications Group Inc. (WCG), "particularly Level 3, unless they further rationalize their capital spending, will be out of money, at the latest, in the first quarter of 2002."
Some equity analysts, while all citing those comments for Monday's selling, disagreed with Gensler, who's also a vice president at T. Rowe Price Group.
"I tend to believe the company has enough cash well beyond 2002," said Andrew Hamerling, an analyst for Banc of America Securities.
Hamerling, who has a strong buy rating on the stock, also said he expects the company to reach its goal of break even EBITDA by the fourth quarter.
The Broomfield, Co., company lost $1.45 a share for the first quarter, narrower than Wall Street's estimate of a loss of $1.75. But in the face of slowing demands for bandwidth fiber-optic networks from telecom carriers and Internet service providers, the company has lowered its revenue outlook for 2001 and 2002.
Also noting the company has "more than enough cash", William Klein, an analyst with Dresdner Kleinwort Wasserstein, said investors overlooked the "incredible financing flexibility" Level 3 now has employed, since it already has passed the construction phase by building up its fiber-optic networks.
Since it has transformed from "a construction company to an operating company", Klein said, Level 3 "has great flexibility on what they do and don't want to spend."
During the initial phase, such telecom concerns as Level 3 had once consumed hundreds of millions dollars each quarter to dig up streets, highways and ocean floors to construct its fiber-optic networks, and thus accumulated a substantial amount of debt.
"Equity investors are certainly also concerned about its debts issue," said Mark Langner, an analyst with Epoch Partners, as debt crimp profits.
Level 3's shares recently traded down $1.09, or 9.7%, to $10.19, on Nasdaq volume 7.2 million shares. The stock hit a 52-week low of $9.13 a share in early April, down 90% from its all-time high of $95.25 last July.
Company representatives were not immediately available for comment. |
