According to Adam Quinton, an analyst at Merrill Lynch, Level 3 has escaped any immediate debt worries, but the reprieve may not last long--especially if revenue falls. "Following the announced Software Spectrum acquisition, we expect thecompany will not risk breaching financial covenants until mid-2004," Quinton said in a research note earlier this month. "Should revenue deteriorate from current levels, the company stated that it could seek to refinance debt maturing in 2005.". Between 2005 and 2010, Level 3 will need to refinance or repay the $6 billion in debt, said Quinton.
"The customers of Level 3 should take this as conscious measures by Level 3 to bolster its financial strength while influencing the demand for its low-cost broadband network," said John Gonsalves, a vice president with technology consultants Adventis, "All this came for an approximately $200 million outflow for a more than $2 billion revenue stream.", What's the plan?Although Level 3's recent acquisitions bought it some time, analysts are questioning the strategy beyond fending off creditors, Some financial experts, even those relatively positive about Level 3's moves, are perplexed by the company's plan, A Merrill Lynch report, for example, questioned the "commercial logic" caseology parallax series iphone x case - burgundy of the acquisitions, noting that the Software Spectrum deal added a significant low-margin business to Level 3's balance sheet..
There is also no guarantee that the software distribution business CorpSoft and Software Spectrum are in will remain stable. One just has to look at the telecom industry to realize how quickly a market can turn sour. But Level 3 remains optimistic. "Improvements in communications technology will continue to drive down the price of moving information and allow businesses to buy software functionality and data storage as a commercial service accessed remotely over broadband networks," Crowe said in a statement at the time of the Software Spectrum acquisition.
Level 3 already boasts a subsidiary that provides information technology (IT) outsourcing services to corporations, called (i)Structure, The company may be clinging to a pie-in-the-sky hope that an industry, already proven to be a niche at best, morphs in a manner it seems ill-prepared to do, according to some analysts, "We heard all of this speculation in droves five years ago and it didn't pan out," said Hype-Free's Oltsik, Others note that telecom companies seem ill-equipped to handle new opportunities such as delivering software over networks, even if Level 3 is part of what was once a "new breed" of network operators, As such, Level 3's strategy is less a hopeful sign for a moribund industry caseology parallax series iphone x case - burgundy bent on melding telecom with software and more a statement of the tenuous times in the market..
If nothing else, Level 3 gains a large customer base through the acquisitions, and goes straight to the head of the class in software distribution. The company becomes one of the largest license managers and software resellers in the world, according to company executives. CorpSoft says it serves more than 5,000 clients in 128 countries. Software Spectrum says it serves half of the Global 1000 companies. The bad news is that heavyweights like Dell Computer and IBM are Level 3's new competitors. A Dell representative declined to comment on the competitive environment, but said, "We're focused on our own customers." An IBM representative couldn't immediately be reached for comment.