* Q3 EPS -8 cents vs Reuters Estimates -9 cents
* Q3 revenue $1.07 bln vs Reuters Estimates $1.065 bln
* Lowers 2008 core revenue, EBITDA view midpoint
* Shares fall 42 percent to 71 cents
(Recasts first sentence, adds CEO and analyst comments, updates
share movement)
By Sinead Carew
NEW YORK, Oct 23 (Reuters) - Level 3 Communications Inc
(LVLT.O) cut its revenue outlook for the current quarter due to
slowing customer spending, raising investors' concerns about its
ability to refinance debt and pushing its shares down 42
percent.
Level 3 said it was continuing to look for refinancing
options and noted that customers were re-examining their
spending plans, causing it to lower its target for revenue
growth for its core business as well as the midpoint of its
expected range for earnings before certain items for 2008.
"Clearly there's a tremendous amount of uncertainty for the
free cash-flow growth for a company that's got significant debt
refinancing requirements in the near term," said Friedman,
Billings, Ramsey analyst David Dixon. "The question is, is this
a pause in customer demand or is this part of a broader
elongated trend in the market?"
Investors worried that if Level 3's outlook did not improve
next year, it would be unable to refinance debt that it is due
to repay in 2010 in the midst of the current credit crunch.
Level 3 shares fell as much as 62 cents, or 51 percent, to
60 cents on the Nasdaq after closing at $1.23 the day before.
The shares were down 42 percent at 71 cents in early afternoon.
Broomfield, Colorado-based Level 3 said it still expects to
have positive cash flow in the second half of 2008 and for the
year 2009. But Chief Executive Jim Crowe sparked concerns when
he told analysts on a conference call that clients were
re-examining purchasing plans due to the credit crunch.
"What we've observed in wholesale and in business is a
lengthening of sales cycles," he said. "If those sales cycles
stretch out in second half of third quarter you can see a
slowdown in revenue growth in the fourth quarter."
Level 3 said it now expects 2008 core communications revenue
to grow by 7.5 percent from 2007, down from its previous
expectation for growth in a range of 8 to 13 percent, first
issued in the first quarter this year.
Its core communications business includes services such as
Internet network support for enterprise and carrier customers.
It also changed guidance for full-year adjusted earnings
before interest, tax, depreciation and amortization to a range
of $980 million to $1 billion from $950 million to $1.1
billion, implying a new midpoint of $990 million compared with
its previous midpoint of $1.025 billion.
Jefferies analyst Jonathan Schildkraut said he was also
disappointed with revenue growth for the third quarter.
"Core (revenue) growth is terrible," Schildkraut said,
noting that Level 3's core communications revenue growth of 0.4
percent from the second to the third quarter was well below his
expectation for growth of 2.5 percent.
The company said its third-quarter net loss narrowed to
$120 million, or 8 cents per share, from a loss of $174 million,
or 11 cents per share, in the year-ago quarter. Revenue rose to
$1.07 billion from $1.06 billion a year ago.
Analysts on average were expecting a loss of 9 cents per
share on revenue of $1.065 billion, according to Reuters
Estimates.
(Editing by Dave Zimmerman and Matthew Lewis)
