Cowen Downgrades Level 3 On Merger Integration Problems

| About: Level 3 (LVLT)

Cowen’s Tom Watts Wednesday downgraded his rating on Level 3 Communications (NASDAQ:LVLT) to Neutral from Outperform, noting that the company is taking longer than expected to integrate its recent acquisitions (among the company’s recent deals: the $45 million acquisition of Servecast in July, the $135 million purchase of the content delivery network assets of Savvis in January, and the $744 million purchase of Broadwing, also in January).

“Customers continue to experience provisioning issues, suggesting LVLT’s acquisition integration challenges are continuing,” he writes. He says the issue is underlined by the recent resignation of CFO Sunit Patel; the company has said it is looking for someone with more operating experience. He adds that “LVLT will have difficulty accelerating revenue growth as planned.”

Watts now sees the company losing 49 cents a share this year, versus 45 cents previously. His loss estimate for ‘08 goes to 36 cents, from 23 cents; for ‘09, he now sees a loss of 18 cents, from 13 cents.

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