LVLT - Level 3

[Guest ValueCarl]

Now, with respect to your comments about a weak PR campaign, we must follow this announcement up with the old, one, two PUNCH!

 

An opening bell announcement adding more color to the Disney relationship, with an afternoon announcement surrounding a very large US Government win!  ;D

 

<The CDN augment will provide the headroom needed to meet demand requirements from Netflix now and to accommodate future growth. Netflix says its subscriber base will exceed 19 million in North America by the end of this year and that they expect more growth and international expansion in future years.

 

“One of the primary advantages of owning our network is the agility it affords – we’re able to scale, augment and, ultimately, better control the performance of our CDN,” said Mark Taylor, vice president of Content and Media. “We’re committed to ensuring that our performance consistently exceeds our customers’ expectations, and we look forward to working with Netflix to serve their millions of streaming customers for years to come.”>

 

http://www.level3.com/index.cfm?pageID=491&PR=958

[DCG]

What advantages does Level 3 have over LLNW? In terms of the smaller competitors to AKAM, LLNW appears to have a much cleaner balance sheet, although neither of them are profitable. LVLT is a company with $6.5 Billion of Debt, and loosing millions of dollars every year.

[Guest ValueCarl]

That's a very good question for which I hope Brker_guy along with his infinite wisdom inside the business, offers us some "color."  ;D  

 

I'll start it off with this, however.

 

LLNW leases, does not own, "colocation space" for their "server farms" as compared to (3), for example. Identical situation for my question to Brker_guy about AKAM, and "expiring" lease agreements for access into their facilities.

 

Now, up until recently, certain ISP's(cables/telecoms, etc. in the last mile) have found it comfortable to let these clowns place their server farms inside their facilities for "FREE" in order to deliver necessary content that their customers want in front of their EYEBALLS.

 

At some point, they are going to have to pay a "DEAR PRICE" for this luxury and easy "ACCESS" while network and facility owners say, why were we doing this again? They will be less useful compared to (3), providing physical network services, for example.

 

In the case of LLNW, they seem to have certain CDN patents and systems which help in the mobile arena. (3)'s CDN patents and technologies come to a great extent from purchasing IBM's full portfolio some years back in anticipation of their need to "CONTENT DELIVER" versus being a DUMB PIPE only STORY.

 

AKAMAI and their MIT intellectual think tank, are very litigious too, as you can see them attacking AT&T's maneuver to ultimately eliminate them from the equation here:

 

http://www.bloomberg.com/news/2010-11-10/akamai-mit-accuse-startup-cotendo-of-infringing-web-patents.html

 

A lot of your question is embedded inside the technical side of "centralized" vs. "localized" CDN services. (3)'s approach is the centralized one with very long in the tooth roots for delivering content as far as the human eye wants to see!

 

 

I believe Storey indicated (3)'s continued willingness to explore adding to their patent arsenal inside the CDN space moving ahead. Maybe that's the "mobile" piece that Goldman's stake in LLNW maintains. We shall see, says all BLIND MEN. I'm still trying to figure out who the hell Scott Goldman, on our conference call was.   imo          

[brker_guy]

Wow!  I missed all of the fun this morning.  ;D

 

Carl and DCG, finally, the truth comes out about this NFLX and LVLT.  I think we are beginning to see the advantage of the LVLT network taking shape.  There are a lot of churns in the CDN business, but this is a huge deal for LVLT if you look at the details of the PR.  Let's start with the headlines:

 

"Netflix Signs Multi-Year Deal with Level 3 for Streaming Services".  We are locked with NFLX for at least 3 yrs. 

 

Second, let's look at the bandwidth consumption:  "As a result of the deal, Level 3 has accelerated plans to further invest in its CDN capacity. Level 3 will double its storage capacity and add 2.9 Terabits per second (Tbps) of globally available CDN capacity, which is in addition to the 1.65 Tbps that was deployed in the third quarter of 2010." 

 

Now, we know why they put out this PR for sure.  That was the hint for the shorts to cover, but I am sure they didn't because shorts are quite stubborn...

 

http://www.level3.com/index.cfm?pageID=491&PR=956

 

Ok, DCG, regarding your questions about competitive advantages to LVLT vs LLNW or even AKAM, this is going to take long, but please bare with me.  In the CDN business, there are 3 key areas (Content Generation, Network, and Last Mile).  Content Generation can be (Voice, Data or Video).  These types of contents need to be encoded, aggregated and archived for distribution.  One needs to have all of the SW and processing engines to optimize and accelerate these contents whether it be at the studios, data centers, or at the co-location centers.  Once you get all of these contents and if you are an AKAM or a LLNW, you need to lease private fiber to transmit your content.   Then, you have the last mile delivery.  Today, people still think of CDN as fast website accelerations and integrated web contents (video inside webpages, ad insertions etc).  More and more, video contents are dominating the IP messages.  Thus, you have A LOT of servers running in parallel to encode or transcode these videos, but you will run into a choke hold if the video contents and file size are large.  Thus, you would need a big pipe to do transmission. 

 

And here is where rubber meets the road.  If you are a content provider, do you want to do caching or real-time streaming.  Caching is nothing more than download and playback.  Latency on caching can be anywhere from few seconds to minutes.  With real-time streaming, you get that instant gratification of video showing up to your TV or monitors.  Now, these days, the battle for IPs on CDN are in the content aggregation, contents processing, and delivery mechanisms.  A few years ago, LVLT sued LLNW on their CDN patents infringement, and lost.  However, AKAM sued LLNW and won.  Go figure! 

 

So what does advantage does LVLT have over AKAM and LLNW?  Big file size contents and that vast fiber network that they don't have to lease  If you are a pure play CDN vendor, you have to pay a fee to lease the fiber and then you have to pay a fee for the last mile delivery.  With a vendor like NFLX, users want to experience "real-time" movie watching experience.  They don't want to see that word on their TV, "Buffering"!  This is why LVLT has the edge in the CDN going forward.  Margins on the integration of CDN and fiber would be better for LVLT than it would be for AKAM.

[Guest ValueCarl]

Brker_guy, you rule this cdn space, thanks!

 

Adding more injury to insult, Goldman Sachs, the largest institution, and controlling share owner of Limelight(LLNW), has been downplaying this loss to AKAM as of yesterday from what I've read, as are other analysts across Wall Street. You would think Goldman would want AKAMAI blood, rather than their overpriced stock as collateral to purchase LLNW, maybe?     

 

<A few years ago, LVLT sued LLNW on their CDN patents infringement, and lost.  However, AKAM sued LLNW and won.  Go figure!> 

 

What you haven't touched upon though, is the P2P "free" IP transit traffic rides which ISP's have been enabling AKAM to accomplish on long distance routes over (3)'s backbone. This relates to the archaic "regulatory compensation scheme" which never anticipated "internet traffic" to be originated or terminated because the system was designed from copper days gone by.

 

When this ancient relic is properly addressed at the FCC, assuming they will stop cow towing to the monopolists(T and VZ) who have provided them job security over the decades, then (3), the "low cost provider" to deliver bits end to end (IP TRANSIT), will finally realize "fair freight" for the $25B and counting "factory cost new" that they have continued investing in for almost thirteen years now.

 

I know that Crowe is finally spearheading the President's working group for National "internet security" amongst other telecom things, but his recommendations to the FCC over the years, has mostly fallen on deaf ears. Like you said, go figure!     

 

http://www.level3.com/index.cfm?pageID=491&PR=948

 

Maybe you would be so kind to pick up more on this cdn "free loading" principle for "inquiring minds." tia     

[Guest ValueCarl]

The Sprint/Clearwire partnership seems to be getting a little bit messier today. 

 

Sprint, Clearwire In Dispute Over 4G Smartphone Pricing      11/11 12:15 PM

 

 

 

NEW YORK (Dow Jones)--Sprint Nextel Corp. (S:$4.020000,$0.080000,2.03%) and Clearwire Corp. (CLWR:$6.5625,$0.5425,9.01%) entered into arbitration on a dispute over wholesale pricing for the 4G smartphones offered by Sprint (S:$4.020000,$0.080000,2.03%) .

The issue revolves around Sprint's (S:$4.020000,$0.080000,2.03%) 4G smartphones, the HTC Corp. (HTCXF:$21.8434,$0.0000,0.00%) Evo 4G and Samsung Electronics Co. Ltd. (SSNLF:$660.0000,$0.0000,0.00%) Epic. Both can ride on Clearwire's (CLWR:$6.5625,$0.5425,9.01%) 4G network, necessitating a payment from Sprint (S:$4.020000,$0.080000,2.03%) . While an agreement is in place, the two companies are interpreting it differently, Mike Sievert, chief commercial officer for Clearwire (CLWR:$6.5625,$0.5425,9.01%) , said last week.

Clearwire (CLWR:$6.5625,$0.5425,9.01%) disclosed the dispute in the company's quarterly filing with the Securities and Exchange Commission last week.

The move is the latest strain on the partnership between the two companies, who aligned to build the country's first fourth-generation wireless network. Along the way, the two have gotten into disagreements over the speed and location of the rollout, and whether Clearwire (CLWR:$6.5625,$0.5425,9.01%) should be directly competing for customers in the same market.

On Oct. 29, Sprint (S:$4.020000,$0.080000,2.03%) initiated the arbitration process to resolve the issue.

A Sprint (S:$4.020000,$0.080000,2.03%) spokeswoman said the arbitration process was ongoing, but declined to provide any update.

"The resolution process is in the early stages, and its outcome is unknown," she said, adding the amount in dispute is not material to the carrier.

A Clearwire (CLWR:$6.5625,$0.5425,9.01%) spokeswoman declined to provide any update.

Sprint (S:$4.020000,$0.080000,2.03%) shares rose 2.8% to $4.05, while Clearwire (CLWR:$6.5625,$0.5425,9.01%) rose 7.5% to $6.47.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/nae/al?rnd=lsk+AWDBY66rwM/Fuvsneg==. You can use this link on the day this article is published and the following day.

 

  (END) Dow Jones Newswires

  11-11-101515ET

 

http://www.level3.com/index.cfm?pageID=491&PR=825

 

 

Level 3 Communications, Inc. (NASDAQ: LVLT) today announced an expanded relationship with Clearwire Communications, LLC, an operating subsidiary of Clearwire Corporation, to support their CLEAR™ 4G WiMax services. Level 3 will provide Clearwire with network transport services as part of their deployment of CLEAR™ WiMax services in major metropolitan markets across the United States.

 

"With a nationwide network footprint, Level 3 offers the network reach and scale to meet our business needs as we rollout next generation broadband services," said John Saw, chief technology officer for Clearwire. "As demand for the mobile Internet increases, we believe Level 3 offers the right combination of network infrastructure and service quality."

 

Under the terms of the agreement, Level 3 will deliver high-speed Internet connectivity to major U.S. cities, including Chicago, Dallas, Philadelphia, Seattle, Washington DC, Houston and the Bay Area. Each 10 Gigabit Ethernet connection will carry data and Internet traffic for CLEAR™ customers.

 

"Level 3 delivers nationwide network connectivity to support Clearwire in delivering advanced network technology for mobile broadband," said Andrew Crouch, president of Wholesale Markets for Level 3. "As greater wireless market penetration and usage places more mobile voice, data, video and Internet traffic on networks, Level 3 is well positioned to meet the capacity demands of our wireless customers and support their ongoing business growth."

 

[DCG]

Second, let's look at the bandwidth consumption:  "As a result of the deal, Level 3 has accelerated plans to further invest in its CDN capacity. Level 3 will double its storage capacity and add 2.9 Terabits per second (Tbps) of globally available CDN capacity, which is in addition to the 1.65 Tbps that was deployed in the third quarter of 2010." 

 

Thanks for the response.

 

How much is this all going to cost and how much revenue will they see from Netflix?

 

"Meeting demands of customers and supporting their business growth" is fine and all, but at some point you need to start making a profit. They've been poring billions of dollars into building up their network for the last decade, but it looks like they've yet to see a dime of profit from it. It sounds like the company has built up a valuable network, but they'll eventually need to start producing cash to stay in business.

[brker_guy]

What you haven't touched upon though, is the P2P "free" IP transit traffic rides which ISP's have been enabling AKAM to accomplish on long distance routes over (3)'s backbone. This relates to the archaic "regulatory compensation scheme" which never anticipated "internet traffic" to be originated or terminated because the system was designed from copper days gone by.

 

When this ancient relic is properly addressed at the FCC, assuming they will stop cow towing to the monopolists(T and VZ) who have provided them job security over the decades, then (3), the "low cost provider" to deliver bits end to end (IP TRANSIT), will finally realize "fair freight" for the $25B and counting "factory cost new" that they have continued investing in for almost thirteen years now.

 

Very good point, Carl!  I forgot about the part about AKAM's free ride.  Hopefully, one day, this free ride and the ancient relic will end.  I was hoping that it ended under this administration... 

 

DCG, regarding your question about cost and contribution to revenue, LVLT has said that CapEx for CDN and other products are success based driven.  So far, they have estimated that $14MIL of Q3 CapEx went into CDN.  There has been estimates of $15-$20MIL per year coming from this NFLX deal.  I have no confirmation of that. 

 

They've been poring billions of dollars into building up their network for the last decade, but it looks like they've yet to see a dime of profit from it.

 

Rome wasn't built overnight either!  To quote Walter's good friend, Mr. Warren Buffett, "A business is worth based upon how much CASH FLOW it generates, discount at the right rate".  You can't be profitable if you don't generate a decent stream of cash first.  With LVLT, you either bet on the jockey or you don't.  I bet on the jockey.  Again, to quote the greatest investor of all time, "Sometimes you're outside your core competency. Level 3 is one of those times but I've made a bet on the people and I feel I understand the people. There was a time when people made a bet on me."

 

[Guest ValueCarl]

You are absolutely correct. If this Wells Fargo analyst is right, on a conservative basis, I estimate $46MM per year over the three years. However, another analyst, Donna Jaegars, with a $2.00 price target on (3),  came up with some paltry $10-15MM for (3)'s take on today's news. She has a strong bias for Akam, as well as another CLEC, TWTC, but I digress some. She was the one who said some years ago that, (3)'s empty pipes would be better served with "white mice" running through them! Affectionately, she became known as, "The Mouse Lady."  ;D

 

Since Jeff Storey was in NYC presenting at a Wells Fargo Tech Conference two days ago, I'm inclined to think this analyst has a better nose into the "revenue stream" this represents. Whether or not it includes the "forward" growth is another story, however.

 

For example, today, just two percent of Netflix's 19MM customer base is streaming their content over the internet, yet it represents 20 percent of the internet's traffic!

 

How fast do you think it will be before 80 percent of their subscriber base is streaming videos and requires new FIBER to be sent via great pressure through an empty CONDUIT killing or maiming all of Donna's white mice? That's another great "moat" differentiator hardly discussed also applicable to Moore's Law which hasn't played out tied to "fiber," by the way.

 

This excludes the fact that the entire media/enterprise complex will be going all IP, a trend CSCO said they missed on their call as respects less STB utilization on the cable and telecom side in favor of internet based "devices."

 

As of q3's end just reported, CDN was growing at 11 percent qoq! I estimate from a base of approx. $200MM since they stopped reporting the cdn revenue number separately. Smaller than AKAM's $1B but a little larger than Limelight.  (3)'s Consolidated Revenues as you probably know is greater than $3.6B since some $400MM in losses due to the acquisition spree and "integration mess," which by most accounts, seems to be fully behind us now!    

 

Up until now, whether for good reason, sometimes criminal, or not, certain analysts and their firms have had great success while strengthening their belief systems that they could slow this freight train down by maintaining dominion over "predicting" its stock price. Like brker_guy was hoping, I hope our management team as well as their financiers have a different plan in store for these "book makers." imo  

 

“This win is likely to be meaningful to incremental revenue growth for the company, which Level 3 very much needs,” said Jennifer Fritzsche, a Wells Fargo & Co. analyst in Chicago. She estimates the agreement will be worth about 5 percent of Level 3’s revenue.

 

http://www.bloomberg.com/news/2010-11-11/netflix-signs-multi-year-deal-with-level-3-to-provide-streaming-storage.html

 

[brker_guy]

However, another analyst, Donna Jaegars, with a $2.00 price target on (3),  came up with some paltry $10-15MM for (3)'s take on today's news. She has a strong bias for Akam, as well as another CLEC, TWTC, but I digress some. She was the one who said some years ago that, (3)'s empty pipes would be better served with "white mice" running through them! Affectionately, she became known as, "The Mouse Lady."

 

Sometimes, I wonder if Donna Jaegars hangs out with the gangs at those dubious websites like Yahoo!.  ;D  She was the little mouse that went sniffing around Crowe's stock sale.  I am glad to hear that Crowe gave her an answer straight up, and shut her up!

 

Carl, HD video consumes HUGE AMOUNT of BW, but you already know that.  If people are streaming 3D HD video, imagine the BW consumption on that.  Just take 20Mbps PER STREAM for HD.  Do that for 19MM users, and they all do that all at once!  That's just land line.  Now, if you tack onto that 400MIL+ smart phone users all streamming too, can you imagine how much BW is being consumed?  Mind you, the smart phone market is growing at an extremely fast rate and expect to hig 1BIL units in 2013. 

 

http://www.digitaltrends.com/mobile/worldwide-smartphone-sales-rose-96-pct-in-summer-2010/

 

http://www.telecoms.com/22493/as-smartphone-users-rocket-android-ousts-symbian/

 

In the US, we have about 298mil wireless users and about one-third of that are smartphone users.  Now, just take 5Mbps PER STREAM for wireless devices (Smart phones and tablets), and let just say 100MIL users are streaming.  We are looking at demand sprinting right past supply.  That's why those legacy Ma Bells (T and VZ) are starting to put caps on users(To mentally train the users to use less BW bc they don't have enough for everyone) in the name of making more money for themselves!  SICK!!!

 

http://twittown.com/mobile/mobile-blog/usa-add-80-million-new-smartphone-users-2011

 

http://blog.nielsen.com/nielsenwire/online_mobile/mobile-snapshot-smartphones-now-28-of-u-s-cellphone-market/

 

I digress! But if we can slowly integrate CDN with transport like this, I think we will win every deal going forward because guys like AKAM and LLNW don't have the network backbone to support it.  So, I am hoping and praying that the AKAM guys continuing with their arrogant stance that they own and control the CDN market.  I hope the FOOL.BOMB and the GS write some wonderful glowing articles on how this deal won't affect AKAM or LLNW going forward.  Then, I hope that they would stand in front the of the railroad and stare directly into a BNSF train rolling right past them.  ;D

 

 

 

 

[brker_guy]

Carl, I forgot to answer your earlier post about Mr. Miller, LMOPX and Clearwire/PCS.  I forgot to tell you the part that I have my wife's IRA money with LMVTX and LMOPX.  Bad idea!  It has been 5 years since I first bought in, and we still are waiting to recover to get out on that.  :(

 

As for Clearwire and PCS, I hope they would be able to pull it off and get some market traction.  I have been monitoring the LTE and WiMax debate, and it's NOT pretty for Clearwire.  At some points here, I hope we run out of spectrum, and Clearwire does own a good chunk of it that they can capitalize.  It will be one sweet merger package if we can get Sprint, Clearwire and LVLT to roll up into one big company.  Then, we might have a shot at taking on the stink Ma Bells (T and VZ).

 

 

[Guest ValueCarl]

Hmm, I've been having similar thoughts of grandeur as you are lately! At the same time, I'm hoping that Sprint isn't trying to get two for the price of one with their little "dispute" now in arbitration.

 

It would be sweet to smell Napalm burning in their last mile monopolies should that happen!

 

<It will be one sweet merger package if we can get Sprint, Clearwire and LVLT to roll up into one big company.  Then, we might have a shot at taking on the stink Ma Bells (T and VZ).>

 

Btw, I have a call into that WFC analyst because something doesn't add up correctly about her comment today, that being, 5 percent of which annual revenue line, knowing that cdn is not a segregated bucket any longer. I hope she's referring to cns revenues today, while anticipating subscriber base growth.  

 

 

[ericd1]

ValueCarl & brker_guy

 

I've been following this interesting dialog on the industry and its players...I'm intrigued with LVLT. It appears they are ideally positioned to handle the huge oncoming data freight train.

 

How do you value the company, or as mentioned, do you simply trust the jockey? What about a new game-changing technology that might not need LVLT's big pipe?

 

Appreciate your insights...

 

 

 

 

[Guest ValueCarl]

ericd1, not to step on brker_guy's toes, but I believe he identified the proper way to value any business with references to the master above. That being, NPV of cash which has been discounted into perpetuity using subjective "growth and discount" rates according to ones own value metrics.

 

The problem with (3) of course, is also intertwined in brker_guy's comment when he alluded to a business having sufficient cache-mixed word intended-to be valued in the first place.

 

That brings us to the replacement cost value(rcv) of the factory, along with its massive footprint, one that has been an ongoing construction project, or a giant erecter set as I have described it for thirteen years and counting. Over the years, I have suggested that they utilize this number for Mr. Market to ponder, but to no avail I am sorry to say.

 

Why? Because Mr. Market, a manipulator inside its collective conscience, refuses to admit that (3) will ever attain "sustainable" free CACHE FLOW over its investment capital. He prefers to keep dwelling on the debt albatross, approx. $6B net of cash for a long time now, which was necessary to create the world's most advanced-efficient and low cost provider-network.

 

Once Mr. Market become a "believer" in copious cache production again, I guess one can start with rcv for a "base number."

 

According to (3)'s presentations, that's approx. $25B conservative cost new since investment capital began turning into network elements during the past thirteen years. This number assumes the network could even be "replaced," which it probably can't, whilst pondering the ROW's and permitting from which another project like that requiring the whole nation to be dug up again, will ever be undertaken.  

 

$25B-$6B(net debt)/2200 fully diluted shares= $8.64 pps.

 

As for a long standing Crowe comment, one which he ponders in the back of his mind in anticipation of Level 4, or the next technological advancement/shift to displace "terrestrial fiber" as the primary source for transporting bits, I'm not smart enough to answer that question.  

 

I will say that part of the time period extending glut conditions over scarcity included DWDM technology, something which slices and dices fiber strands so that its light can fit more data along its path. Recently, I've been researching the useful life of fiber, be it dark or lit, even if it is stuffed and protected inside of plastic conduits which might be denigrated due to "weather conditions" etc. Someone I know, who was attempting to solve problems for Qwest some five years ago now, has told me fiber can lose its full effectiveness in "six years" as a result of same. When I see (3) announce the newest, state of the art fiber, being dropped into another one of its empty pipes, assuming they don't hide such an important data point, I'll be very happy. That's a major moat builder and product "differentiator" for which no competitor can accomplish!      

 

 

All data research I continue to absorb, on the other hand, is a reiteration of what the engineer as well as visionary, James Q. Crowe, has stated over (3)'s entire life cycle, that being, terrestrial fiber is the most efficient method for delivering "videos" X the globe. In order for the best, most cost effective user experience, other delivery methods including satellite and wireless, for example, must be directed to ground fiber.

 

Maybe it's "teleporting," like depicted in Star Trek decades earlier via some bio molecular means which replaces fiber for something else, I don't know.

 

After all, wasn't it George Jettson who brought us to the "video phone"?

 

Beam me up, Scotty!  ;D  imo

 

             

[DCG]

What CDN network does Google use for Youtube?

[20ppy]

It seems that Google has its own backbone network with dark fibers. Some older article on this. http://mashable.com/2010/02/10/google-isp/

 

 

[20ppy]

Another link: http://www.google.com/appserve/fiberrfi/public/overview

 

(3) should know perfectly well how much it costs to build a dark fiber network than renting one, etc. for most ISPs. Companies like Google is really an exception, they can do anything pretty much.

[DCG]

What's stopping Google from continuing to build their own network and leasing it out to companies like Netflix?

[Guest ValueCarl]

Brker_guy, I have a treat for you. Donna Jaegers, "The Mouse Lady," can't find enough truth serum to tell the LVLT story in the way that the very sharp radio host positioned his questions for her! He had to waiver and turn her direction at one point in conversation.

 

Sadly, she's still up to her eyeballs with white mice; unwilling to extrapolate what the (3) network means to the world.

 

She and the rest of those Wall Street scoundrels will learn soon enough!

 

http://www.bloomberg.com/news/2010-11-12/d-a-davidson-s-jaegers-discusses-level-3-stock-audio.html?cmpid=yhoo

[brker_guy]

I have a treat for you. Donna Jaegers, "The Mouse Lady," can't find enough truth serum to tell the LVLT story in the way that the very sharp radio host positioned his questions for her! He had to waiver and turn her direction at one point in conversation.

 

Oh Brother!!!!  You hit the nail on the head with that one, Carl!  Where the HELL do they find these so-called "analysts"?  I listened to the whole thing and half way through it; I almost hurl.  Granted that I am besieged by a very bad flu, but I just want to hurl at her lies.  For instance, that XO and GLBC are the only "pure" long-haul player?  Really?  That's news to me.  I wonder what the guys Qwest and LVLT have been doing all this time... Let me see.... She also highlight the value of LLNW brings to wireless streaming.  Uh, it's more like download and playback is more like it.  I have worked in the wireless multimedia industry since 2000, and ONE word I hate the most is "Ecosystems".  For one thing, it's not even a word, and another, what the hell does that mean?  I hated when I stood in front of VCs, and they kept bringing up that word.  But I digress... 

 

Another thing that she said that bothered me was that she kept emphasizing the debt level at LVLT and how much that was a risk to investors.  To paraphrase Marty Whitman, debt is all relative as to which side of the balance sheet you sit on...  Claiming that XOHO and GLBC have big financiers backing them is a joke!  Icahn is out for one person: HIMSELF!  He would be better off selling ALL of XOHO to LVLT and move on with his life, but his monstrosity of an ego won't let him do it.  I also wonder what those backers of LVLT (Prem, SEAM, Thornburg and even Legg Mason) are.  Are they chopped livers to her?

 

Also, she put out a buy on GLBC.  Perhaps she must have missed the earnings CC a few weeks ago; GLBC revised their earnings downward for Q4 and the rest of 2010.  But like all analysts, she will sing the high praises of GLBC until next quarter. :-)

 

Ok, I am off my soap box now! :-)

[brker_guy]

Ericd1, I look and value LVLT in two ways.  One, I look at their fiber asset and its replacement cost.  A few years ago, OID did a terrific interview with one of the fund managers(I think it was Weiss) on the the competitive advantage of LVLT's fiber conduits versus others.  All of these so-called "analysts" have never been near a fiber trench, but yet sit up there on their Wall St. Pantheon saying that all fiber assets are commodity.  They couldn't be more wrong!!!  If you do subscribe to OID, that edition of the LVLT interview is worth reading to give you some ideas of the replacement cost of LVLT's network.  I am inclined to say that it's somewhere $25BIL.  Just take a recent deployment of VZ' FIOS for FTTH and T's UVerse.  I read somewhere that FIOS cost was somewhere $22 to $30BIL while T's was somewhere around $10BIL.  Now, look at the subscriber growth of FIOS versus Uverse.  I have heard more complaints about UVerse through my circle of friends than FIOS:

 

http://dhdeans.blogspot.com/2006/10/verizon-fios-229-billion-investment.html

 

So, build out a network with the reach and scale of LVLT, you can expect that it will cost that much.  Any statistics you want to look, you will find that LVLT has more AS (Autonomous System) than anyone!  So, that investment that they made was not wasted.  I agree with Carl's metrics that if you net out the debt from that replacement cost, you will get somewhere around $8 PPS. 

 

http://as-rank.caida.org/

 

The last couple of years have not been kind to LVLT.  I should have seen it coming, but I was in denial.  History has shown that if you are a serial acquirer like LVLT once was, things would go bad for you.  Crowe even acknowledged this during one of his call with analysts after they bought Williams, I believe.  I think what took LVLT down was their underestimation of the complexity of the integration.  This contributed to the CASH FLOW problem that they had the last 2 years.  With that said, I think the last two quarters have shown signs that their CASH FLOW will improve, and this is the other metrics that I use to value LVLT. 

 

A few years ago, I met a fellow in my industry who had some associations with Crowe and company during their days at MFS Communications.  That fellow told me that when Crowe and Kiewit first built out MFS, they thought it would be great to be used for the Internet(This was during a time that the Internet hadn't take off yet).  Needless to say, Kiewit and Crowe built it, and it was used for the Internet.  MFS ended being bought by Worldcom, and MCI and now is part of VZ.

 

Anyway, that fellow told me this that I still remember to this day, "Those guys(Crowe and Scott Jr) at Kiewit were really smart; they were way ahead of their time."  That fellow was a subcontractor to MFS, and that made a big impression with me more than anything because here was one of their subcontractors saying nice things about them nearly 10 years later.  So, my final metric on LVLT's investment is the management.  Since this crisis hit after they bought so many companies and went through a big reorg, granted they have a lot of haters out there, but the management of LVLT delivered on what they said they would.  The best part about this is that they don't get suckered into play Wall St's sleazy games of guidance.  I thought that was the dumbest thing that they did.  Once they stopped the guidance-giving game, we have wonderful analysts like the "white mice" lady running around making idiotic statements about them.

 

I think Jeff Storey is a great hire for them; he is as good as advertised at being an operational exec.  He really got that ship turned around for sure.  One more quarter like we had this Q3, and the shorts are going to be in for one big hurt...  So, I hope that helps, Ericd1.

 

[brker_guy]

Carl, don't know if you saw Longleaf's Q3 letter yet, but interesting comments on LVLT.

 

Level 3 has irreplaceable fiber assets, and

demand for bandwidth is growing rapidly with the increasing movement of data and

video across multiple platforms. The company’s pace for adding new direct customers

has been disappointing. The contribution margin from increasing top line growth is

substantial. Translating obvious demand into strong organic revenue growth in the

near term will determine success.We are unhappy with Level 3’s operating results and

stock price. You can assume that we are neither oblivious nor idle.

 

Don't know if the last statement is a threat or it's real.  They only sold out 4.5MIL shares last quarter:

 

http://www.nasdaq.com/asp/holdings.asp?symbol=LVLT&selected=LVLT&FormType=Institutional

[Guest ValueCarl]

Brker_guy, I like your soap box. Your technical and fundamental "stumping" will at least drive investors on this board to the right answers as they look towards "profiting" greatly from the most advanced light the internet offers to global participants. Glad to see OID has a value estimate similar to mine, too! :-)

 

As for SEAM, yes, I did see that early on, and although their words show frustration, I too; feel their pain.

 

Next week, Watsa, etal, step up to the plate. Will they have swung for the fences, taken another fat pitch, or left the ballpark in whole or in part?  8) 

 

Stand firm on your "soap box," however, since another "aerial bomb attack" is being released from the skies by those "FOOLS.BOMB."

 

It won't be soon enough before (3) goes "NUCLEAR" on these "BANDITS." imo

 

<Unfortunately for Level 3, Akamai (Nasdaq: AKAM) has been the sole primary content-delivery network for Netflix since being tapped earlier this year. Did Level 3 step in because Akamai wasn't doing a good job or because it simply came in with cutthroat pricing?>

 

http://www.fool.com/investing/general/2010/11/13/a-fool-looks-back.aspx

 

 

[brker_guy]

Carl, that OID edition with the full LVLT interview was done sometimes in 2004-2005, I believe.  That was before LVLT became a serial acquirer.  I think the interviewee(Weiss) put a price on LVLT of $20 back then, but that was then, and this is now. 

 

Luckily, I bought some LVLT notes and doubled down on my position back in Dec '08 which saved my bacon, but I am still mad at how Crowe and company messed up on that integration of 7 different companies.

 

I am very disappointed at these FOOL.BOMB guys... This guy, Rick Aristotle Munarriz, at one point was a good FOOL writer.  What has he become?  I missed the days of Bill Mann and those guys who were...  Those were the smarter FOOLs.

 

I think Watsa just posted his 13F:

 

http://www.sec.gov/Archives/edgar/data/915191/000095012310104863/o66554ae13fvhr.txt

 

 

[Guest ValueCarl]

There are a lot of "convert shares" there, so fat pitch be damned, I guess. At least they didn't leave the park in whole or part. 

 

With what seems like high noon upon us, it's time for the "serial nature" of their strategic asset purchases in the metro space, values which have thus far been obliterated, to come back to life!

 

I have likened it to the "Packman Game" having moved their radius closer to end users in order to be fed properly, and appropriately. I hope management is as hungry as we are! 

 

 

Mixed feelings as to whether Crowe stays or goes at this juncture. I lean towards stay, but I'm a sucker for great visionaries! Strangely enough, you and I have a similar story on the quality of this management team/construction company inclusive of a certain NJ sub, who once told me about how "smart" these people in the Kiewit organization, extended to (3) are. imo