CHICAGO — NXTcomm — Level 3 Communications Inc. (Nasdaq: LVLT – message board) said today it has completed its Internet2 network services backbone, capable of 100-Gbit/s speeds. (See Level 3 Completes Network.) With this announcement, and plans to further expand its metro fiber network, Level 3 says its enterprise business is on the verge of exploding.
Level 3 Communications had been aggressively adding to its fiber capacity to reach enterprise customers through a series of acquisitions, including Telcove, ICG, and Progress Telecom. The company now says that is has the opportunity to increase its reach in metropolitan areas by about 20-fold.
BusinessWeek’s June 25 cover story was titled “Telecom Back From the Dead.” It’s tough to think of a more welcome headline in Denver, which lost 75,000 telecom jobs in the early years of this decade as Internet stocks nosedived. Companies like Level 3 and Qwest had built coast-to-coast fiber optic networks that went largely unused. Now, with YouTube, iTunes and other bandwidth-sapping audio and video applications ruling the roost, Internet backbone companies are back.
“Today, Level 3 is alive and well again,” writes Spencer E. Ante, noting that “Level 3 says more than half of its network traffic today is from Web video, vs. no such traffic in 2000.” Level 3 stock hit a high of $129 in March 2000. Two years ago this month, it sold for $2.07 a share and Friday closed at $6.15.
“For a long time they were on death watch, but now they are the last guy standing in the U.S. wholesale (bandwidth) business,” the article quotes analyst Stephan Beckert.
High debt levels have kept Level 3 in the red, but a strong bond market allowed them to refinance, Ante writes, and analysts expect positive cash flow by the end of the year. It’s been a long time coming.
On Thursday, stock guru James Cramer (whose column has been running in the Rocky daily since February 1999) wrote that Level 3 is “a pure play on bandwidth shortage. The stock is starting to creep back now.” It’s the “most explosive stock” he follows, Cramer added, since Apple and Research In Motion have “gone up huge.”
Things look rosier on the rebound; too bad you have to get flattened first.