LVLT - Level 3

[txlaw]

TxLaw,  I know.  I am frequent user of Skype myself to talk to my relatives and clients in Asia.  It's amazing.  I think this is Microsoft's strategy to combat Facebook and the social networks crowd.  You can not deny the existing usage base of 663Mil subs.  In one swoop, MSFT just got into the social media business and VOIP.  Skype's business is doing well too.  I carry a balance with them actively, and I renew my subscription on it every year.

 

I think we need to remind our IR people at LVLT to start getting out that message of Lync-certified if you know what I mean.  ;)

 

 

Yeah, and like I was saying on the MSFT thread, Mr. Softee understands that in order to be the platform provider for our Internet-connected devices (whether tablets, "smart phones", PCs, TVs, Surface devices, etc.), they must incorporate an over-the-top audio/video solution into their OS's. 

 

Skype is a big time brand in the space, and I guarantee you they have some valuable IP that MSFT will incorporate into Lync and the consumer side.  It will be interesting to see if all the MSFT communications services are branded using the Skype name.

 

 

[brker_guy]

TxLaw, before we get way ahead of ourselves and be too excited on this deal, I must tell you of my personal experience with Skype.  A few years back before eBay came to Skype with a temping offer which I thought at the time was overvalued, I got a chance to meet with one of the founders of Skype from an introduction of a friend of mine who was in charge of sales for Skype in Asia.  I thought they had a very entrepreneur spirit and go-get them kind of an attitude to them.  So, when they got sold to eBay, I saw a mass exodus from Skype and along with that exodus went the brain drain.  As you know, eBay did as good of a job integrating Skype into eBay as LVLT did integrating the 7 companies we bought prior to GLBC, and that is not compliment to eBay!

 

I was really surprised how Meg Whitman got away with that big loot that she got for butchering that purchase and got into politics.  Thank God she didn't win in CA!  Anyway, it's a credit to them that they have been able to increase sales to $1BIL, but I sure hope Mr. Softee does a much better job of integrating Skype into MSFT than eBay did or have a better strategy for them.

 

Well, as for my rich friends who used to work at eBay, they are now funding tech startups and buying up inflated real estate properties in China...  Go figure!

[txlaw]

TxLaw, before we get way ahead of ourselves and be too excited on this deal, I must tell you of my personal experience with Skype.  A few years back before eBay came to Skype with a temping offer which I thought at the time was overvalued, I got a chance to meet with one of the founders of Skype from an introduction of a friend of mine who was in charge of sales for Skype in Asia.  I thought they had a very entrepreneur spirit and go-get them kind of an attitude to them.  So, when they got sold to eBay, I saw a mass exodus from Skype and along with that exodus went the brain drain.  As you know, eBay did as good of a job integrating Skype into eBay as LVLT did integrating the 7 companies we bought prior to GLBC, and that is not compliment to eBay!

 

I was really surprised how Meg Whitman got away with that big loot that she got for butchering that purchase and got into politics.  Thank God she didn't win in CA!  Anyway, it's a credit to them that they have been able to increase sales to $1BIL, but I sure hope Mr. Softee does a much better job of integrating Skype into MSFT than eBay did or have a better strategy for them.

 

Well, as for my rich friends who used to work at eBay, they are now funding tech startups and buying up inflated real estate properties in China...  Go figure!

 

Haha, well put.

 

Hopefully, you'll have as much success with your start up as your friends at Skype and Ebay had.  I might be asking you for a job at that point! :)

[Guest ValueCarl]

Be careful, Brker_guy, our board host has made it perfectly clear that, those of us who intend on pointing out "conspiracies" whether they're beneficial to mankind like the one you point to, or more sinister in nature like I sometimes point out, are to be banned to the Island of Misfit Toys!  ;D It's nice to meet you though, Mr. Red Nose Reindeer!

 

<Well, Mr. Ballmer, looks like you are going to need A LOT OF Bandwidth soon, and I think Mr. Gates has a friend on the Berkshire BOD to introduce to you.>  

 

Now, maybe our board host doesn't like analogies to broad financial history inclusive of what "The Oracle" attempts to do from time to time either, like when he compared the 08-09 IMPLOSION to "Pearl Harbor" which was as we all know, a day that lives in INFAMY for the blatant act by our enemies during the period!!!!!!!!!!!

 

But is it possible, gentlemen and ladies who tread water here, that after a little more than two years since the "trough," those band of thieves on Wall Street have "Awakened The Sleeping Giant"?  ;D  

 

I want to see those 500' feet of fiber to 100,000 Enterprise Buildings US closed ASAP so we can put it to those MONOPOLISTS at their GATES once and for all!!!!!!!!!!!!!!!!!!  ;D

 

"BRING IT ON!" James Q. Crowe

 

[brker_guy]

Carl, let me put on that Different Strokes character on for a second, "What are you talking bout, Willis?"  ;D :D  I know Sanjeev.  He would not want to band us like that, would he?  :D Sanjeev, all kidding aside.  Thanks for letting us having fun with this thread, my friend.  When you come to Omaha again next year, I will buy you a drink.

 

TxLaw, regarding your comments about startup, "Hopefully, you'll have as much success with your start up as your friends at Skype and Ebay had.  I might be asking you for a job at that point!", I think I have learned my lessons from startups and have found my religion.  It's called the Temple of Value Investing...  I like practice my ways of life from the lessons I learn from my Financial Gods.  I have enough startup scars on my body that will last me a lifetime as a results of irrational greed and hubris inflicted by greedy VCs and irrational management.  I just gave up on my last startup because of this last reason... It's sad to see it end, but I want to sleep well at nights...

 

Who knows?  May be when we actually have the "rise of the machines", I might consider going back... ;D ;D

[Guest ValueCarl]

We're off the chart in share volume whether double counted Nasdaq or not, at 112MM heading into the last hour. A 4.5 percent rise is nice, but there should be more to come, unless there is some type of "orderly exchange" going on behind the scenes. 

 

http://www.google.com/finance?q=lvlt

[brker_guy]

Carl, let's all give a round of "jeers" for these idiots at AT&T aka T-Rex.  They are now unleashing their lobbyists and lawyers into DC to get this deal done:

 

http://www.dslreports.com/shownews/ATT-CEO-TMobile-Deal-All-About-The-Consumer-114152

 

Really, "It's all about the consumer"?  Could have fooled me!

 

But my favorite idiotic quote of the day is this, "AT&T’s failures have never been because AT&T lacks the resources or money to operate a cutting edge network. AT&T’s failures have come from the company’s trademark tendency to place investor interests above not only consumers, but the overall health of the company and network. As a result, customer satisfaction and network performance has consistently suffered, and acquiring T-Mobile fixes none of AT&T’s problems."

 

I am still puzzled how come is it that AT&T wireless is ranked dead last by Consumer Reports if they put customers first?  I find these statements to be very laughable...

[Guest ValueCarl]

Indeed, Brker_guy, it's indicative of those decade long moments where as a shareholder I watched them incinerate shareholder capital with one flawed strategy after the next until I got religion and sold the LU spin off near highs, and TREX as well. Of course, in (3)'s nascent stages we would continue to hear as we do today, the gnashing of teeth by those who have not been satisfied by them investing $37.5B in "cost new" network assets after Level Crossing is ONE, in order to ensure becoming the world's most advanced communications network always looking to their "customer needs" first, while fully understanding that, without customers, there is NOTHING for SHAREHOLDERS!!!!!!!!!!!!!    

 

The greatest teaching lesson for me in T Rex's name came from one of the internet's "Founding Fathers," an MIT grad himself, Dr. Leonard Kleinrock when he said during a presentation at UCLA, "In the short term AT&T was right about shunning investments in the internet; in the long term they were very wrong."

 

They were right under his nose in 1969, and took a "pass" on the promise the internet would bring for its long term shareholders inclusive of widows and orphans today.  

 

That's about 1.5 years ago now, and his words have never rang so clear and true! Much to the extent that I had a TMOBILE rep record me for her management to hear that, if they attempt to gouge me or cost me any money for their CRUMBY NETWORK when and if they finish this customer usurping, I will DROP them like the DIRTY RAG that they are!  >:(    

[Guest ValueCarl]

IV's LVLT message board is an interesting place frequented by some very gifted financial minds both institutionally speaking and of the Wall Street ilk. There are serious traders/hedgies mixed within both categories and independently there as well. However, if one thought there was "encryption" here requiring decoder rings to decipher messages from people wearing "tin foil hats," they would probably need to speak "Mandarin" fluently as well as write it over there!  ;D

 

Then again, I happen to be one of those types who are attracted to Mandarin people inclusive of the way they think through problems. All kidding aside, there is much to be learned and gleaned inside that environment. Toddforthree as one example, recently did an outstanding job evaluating (3)'s Debt/Ebitda covenants before and after Level Crossing's merger, putting to rest the bear case of "borrowing capacity" and the necessity to officially dilute with stock moving ahead. You can be sure this is part of the excitement building in the stock in real time as this deal is strongly assumed to be non-dilutive inclusive of "issuing stock."       

 

In the past, even before players left Yahoo Finance's boards in favor of more sane environments like IV, Professor Mark Hirschey of Kansas University was a frequent guest on boards like that in addition to "Fool Land." That was even before he gave up on (3) circa 2004 or 2005, I think, in advance of his untimely death last summer. Going way back, Professor Hirschey and his team of finance majors were utilizing those message boards to study behavioral finance in its nascent stage as well. I didn't always agree with the good professor, but he was an interesting gentleman who did his best to present his ideas both intelligently and professionally always maintaining a civil approach.

 

If there was a classic event that I can recount for Professor Hirschey, it was his earliest involvement post tech crash as a (3) owner appearing on behalf of his family at the Orpheum Theatre in Omaha, NE. After identifying the huge stake he had accumulated on behalf of his loved ones with many less shares in the bucket than today, he went on to implore upon the management team to work diligently at growing their business once the stage lights and hubris from that "Show Time" were dimmed.     

 

One of his favorite sayings while taking into account the subjective nature of calculating IV was in closing that, "your mileage may vary."  :D Some hold him responsible for the option concoction(s) tied to S&P 500 performance known as OSO's which was a concern that only became alleviated when the stock was gutted for long durations of "rolling periods," never to find harmful "in the money" values at least up until now. I have never confirmed if it was his invention or not. From my perspective, the builders of this enterprise were/are going to get paid, one way or another, regardless of how much I squawk. Therefore, the best outcome for all shareholders could only be derived from the greatest top line "revenue growth" inside very large "addressable markets" over their highly levered factory which falls aggressively to the bottom line(high margins); a fact that remains real and in front of our noses today.

 

God rest Professor Hirschey's soul.

 

http://www.news.ku.edu/2010/july/20/hirschey.shtml 

[Guest ValueCarl]

We added HBO GO Mobile App delivery as a client for our CDN services this morning.  ;D

 

http://www.thestreet.com/story/11114768/1/hbo-selects-level-3-as-a-cdn-provider-for-hbo-go174-mobile-app-delivery.html

 

 

Level 3 Communications, Inc. (NASDAQ: LVLT) today announced it has been selected by HBO ® to be a provider of content delivery network (CDN) services supporting the new HBO GO ® mobile app delivery initiative. The application, which launched on May 2, gives HBO subscribers access to HBO programming on their Apple ® iPhone ®, iPad ®, and iPod touch ® as well as select Android™ devices. To enable delivery of this premium media content, HBO will leverage Level 3’s expertise and network capacity for delivering bandwidth-intensive content to mobile devices.

[Cardboard]

Should we merge this thread to the MSFT thread since they are now talking about the Skype acquisition?

 

What I still find amazing is the lack of attention by so many investors on the "delivery" mechanism of telecommunications which is limited by "physics": speed of light and available electromagnetic spectrum.

 

Of course, pipes can be added when full and more spectrum can be acquired from players who don't use it, but at what cost?

 

This is what Clearwire's CFO mentioned at a Jeffrey's conference yesterday:

 

"Spectrum valued at $23.2Bn to $46.3Bn assuming $0.50 to $1.00 per MHz-POP"

 

We also know the sunk cost of the Level 3/Global Crossing networks and it should be clear to anyone out there by now that LVLT has the best, most cost effective network considering the amount of deals and players that they are signing on almost a daily basis.

 

If Skype is worth $8.5 billion, while producing no profit at all, or just for its free subscribers, then what is worth the pipes and spectrum that make all of this possible for ALL the players out there? Who is going to have pricing power when all these players (Microsoft-Skype, Apple Face Time, Google Phone, Verizon - ?, AT&T - ?, Sprint - ?, Comcast - ?) want to offer top notch speed and service to their customers?

 

Cardboard

[Guest ValueCarl]

Cardboard, if Ballmer offered me FIVE PPS right now to start the BIDDING WAR, you have my vote to move this thread over there! It should be known that, I haven't changed my price for Mr. Ballmer in well over a year, despite all the changes to our enterprise, and that's still a STEAL DEAL! Of course, one could see how something more akin to "The Northern Pacific Corner" could transcend time in this matter of "The Network Partner" that everyone NEEDS in providing internet roads to the globe!  ;) 

[Cardboard]

It is almost like everybody wants to acquire the air travel carriers while someone controls the oxygen in the atmosphere.

 

If you don't like our cost of oxygen then you can always go by boat...

 

I wonder who is going to be the first one to wake-up and try to acquire it because that is where the monopoly lies. Once you have it, you can block your competitors or at the very least cause them significant headaches and costs.

 

Cardboard

[brker_guy]

Well, Guys/Gals, take a look at this table.

 

We already booked Comcast with 22mil subs.  We got Netflix' 23.6mil subs, but now we got HBO which has 28.6 mil subs:

 

http://nextbigfuture.com/2011/04/netflix-has-236-million-subscribers-and.html

 

If eyeballs are what drive valuation, we just got ourselves a whole bunch of eyeballs who will tune to us.  Skype and MSFT, we got your back too!!! :D :D ;D

 

Very nice win for us!!!  Very nice!  Showtime is NEXT!

[txlaw]

The beauty of the MSFT-Skype deal is that we (LVLT shareholders and consumers) now have a behemoth on our side in the war against the last mile incumbents.

 

 

[ericd1]

How does MSFT morph Skype into a "very low cost" cell phone subscription service?  Other than Wi-Fi, Wi-Max, you still need a data connection.

 

I'd dump my family's monthly cell bill in a minute if I could!

[Guest ValueCarl]

Good God, Graham! Keep up the great work before you ruffle value fellow feathers so much to the extent that they ask you to walk the plank as a result of the blasphemy you attempt to speak in front of them!  All aboard the (3) Train to Internet Nirvana! ;D

[Renkane]

Looks like people are finally beginning to notice how valuable the installed pipes can be:

 

WSJ(5/11) Sidera, Fiberlight To Go On The Auction Block

10/05/2011 23:34

(From THE WALL STREET JOURNAL)

By Anupreeta Das Fiber-optic network companies Sidera Networks and FiberLight LLC are on the sales block, people familiar with the matter said, hoping to fetch high prices amid the explosive national demand for high-speed communications services.

 

Sidera, which operates an Internet network in such cities as New York and Chicago, is seeking around $800 million, these people said. That is about 10 times its roughly $80 million in annual earnings before interest, taxes, depreciation and amortization, and in the range of what other fiber-optic companies have recently sold for, they added.

 

Sidera, the Latin name for "constellation of stars," operates a network that it says carries every major stock-exchange trade in the New York area. The company was previously known as RCN Metro Optical Networks, a unit of RCN Corp., which was taken private in a 2010 leveraged buyout by Abry Partners.

 

FiberLight, which is also privately owned, had about $50 million in annual EBITDA and is seeking as much as $500 million, the people familiar with the matter said. Founded in 1998, FiberLight provides network services, including broadband Internet, in and around cities such as Atlanta, Houston and Miami.

 

The companies have hired investment banks to run auctions. Private-equity firms that own fiber assets, as well as larger telecommunications companies like AboveNet Inc. and Paetec Holding Corp. are expected to take a look, the people said.

 

 

[20ppy]

FFH has a ton of LVLT shares, how nice!

[brker_guy]

Sidera...Sidera...Sidera!  RCN Corp was one time a Peter Kiewit company, folks, in case you didn't know.  So, basically, RCN and LVLT are like brothers and sisters with same parents.  RCN had to go and sell out to a PE.  Bad idea!

 

BTW: TxLaw, Cardboard and Carl, since we all talk about spectrum and LTE rollout, I like to share with you more sinister news from the world of T-Rex:

 

http://www.fiercewireless.com/story/lawmakers-worry-att-could-use-usf-funds-lte-buildout/2011-05-10

 

http://thehill.com/blogs/hillicon-valley/technology/160121-atats-subsidies-an-issue-in-merger

 

TxLaw, isn't this kind of action by T-Rex illegal to us taxpayers? 

[Guest ValueCarl]

At some point, Mr. Watsa will add a great deal more value to his BV if he allows himself to get off the interest rate pedal, and convert his hybrid bonds inside a $400MM convert tranche into more shares too! I look forward to seeing his "CONVICTION" about this enterprise's prospects in the way he navigates around that issue, i.e., voluntary conversion at $1.80 pps or making my (3) managers force him at $3.99 pps!  ;) Even usury interest is boring compared to the way "real growth stocks" RUN assuming Mr. Watsa believes in such a chance or is now ready to do something even more creative!!!!!!!  

 

Brker_guy, what are the chances, if any, of (3) wanting its sister back at such prices, or have they satisfied the coverage area sufficiently with other acquisitions like the one in the former Sears Tower building where Sunit came out of, i.e., Looking Glass?        

[brker_guy]

"Brker_guy, what are the chances, if any, of (3) wanting its sister back at such prices, or have they satisfied the coverage area sufficiently with other acquisitions like the one in the former Sears Tower building where Sunit came out of, i.e., Looking Glass?"

 

I think that the chances are really low because there is no synergy to be had by buying Sidera.  The metro assets that LVLT got when they bough Looking Glass, Telcove and others have pretty much covered the same footprint if not more than what Sidera does.  The only thing we would gain from Sidera is MegaCables(remember this asset in south of the border from us?). 

 

What Sidera/RCN should have done when they were in Chapter 11 was to go to the same bankers that LVLT had and looked for similar deals like LVLT.  I don't know why they didn't do that.  Heck, Mr. Crowe and Mr. Scott were sitting on the RCN board before they went belly up....

[Guest ValueCarl]

Hmm, we have discussed our prior success in "Junk Bond Land" inclusive of that rcnc paper we once made coin on, Brker_guy, but my memories of the equity gone down still smarts in the pants. I hadn't followed it much after bk. Tell me about what you're thinking as respects Sidera and Megacables today inclusive of how Level Crossing doesn't satisfy (3)'s desire to be a major player in Sud America? tia

 

http://www.telegeography.com/products/commsupdate/articles/2006/03/10/rcn-sells-megacables-to-fellow-shareholders/   

[Mikenhe]

LVLT have partnered with HBO for the HBOGO mobile app.

 

HBO have now have over 1 million mobile app downloads...

 

 

thats already about 5% of the number of people who have netflix accounts

 

nice!

[brker_guy]

Carl and Ben, it's been awhile since I have been involved with RCN too.  Once the "resource conversion" took place after bankruptcy(i.e. converting all of those RCN debts into new RCN shares at $23 per share), I couldn't run up the hill fast enough.  So, I might have missed the finer details that RCN/Sidera had sold MegaCables.  Regarding Mr. Slim, Ben, I don't know if we want him as a large shareholder of ours.  I want to have wonderful dreams when I sleep at nights.  As Carl has illustrated in that WSJ article on Mr. Slim, I don't want the Feds or any govt to go after us for monopoly practices...  Let's stick with the good shareholders that we have(Mr. Watsa, Mr. Hawkins, Mr. Thornburg, and soon ST Telemedia).  These guys at ST Telemedia will teach us how to crack that 1.3bil people market to the North of them.  Heck, they and Mr. Watsa will even teach us on how to crack that 1.1bil people market to the West of them.

 

This sound very self-serving(bc I am a S shareholder), but I hope Mr. Miller at LVLT thinks about how to take out Sprint's wireline business from them.  If any of these following events take place (1. Sprint wireline buyout, 2. a PR on Facebook win, 3. a PR on Twitter win, or 4. a PR on Groupon win), then we would be going through the roof like Mr. Mason has suggested...