Every time Wall St. looks at Level 3 (NASDAQ: LVLT) it sees promise. The company provides broadband pipes all over the US and some abroad. In a world where high-speed data, video, and voice are powering internet traffic, the shares should be the perfect investment.
But, they aren’t. Over the last year, LVLT is off close to 60%. It is hard to find any other widely-traded stock in that neighborhood.
Level 3 shares were downgraded today, by Morgan Stanley, from "equal weight" to "underweight" In layman’s terms that means sell the shares as soon as possible. According to Reuters the MS research note said "Level 3 expects to generate negative free cash flow in 2008 and remains highly leveraged." The news sent LVLT down another 6%.
Level 3 still has $6.3 billion in long-term debt, and, without any operating profits, it is an unlikely buy-out target.
The two men who run Level 3, James Crowe and Kevin O’Hara have been at the company for almost a decade. The board is made up of retired executives, a former college professor, and an admiral who runs the nominating and governance committees, all asleep at the helm.
Douglas A. McIntyre
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