LVLT - Level 3

[Guest ValueCarl]

All aboard rating agencies keeping The MYTHS honest in "after hours!" I want to see GAP open after GAP open so Myths can shut their YAP pers on how ONE POINT over ONE POINT is no big deal to miss or two points over one point for that matter(plus one hundred and two hundred percent respectively)! LOL

 

UPDATE: Ratings Agencies Review Level 3 For Upgrade On Takeover      04/11 03:36 PM

 

 

 

(Adds S&P review in the first and the 11th through 13th paragraphs, updates share price.)

DOW JONES NEWSWIRES

All three of the major credit-ratings agencies are examining Level 3 Communications Inc. (LVLT:$1.70,00$0.26,0018.06%) for potential upgrades after the network-services company unveiled a $1.9 billion merger earlier Monday, as all three noted possible benefits for leverage and cash flow.

Level 3 agreed to acquire Global Crossing Ltd. (GLBC:$24.97,00$10.17,0068.72%) , a combination that would likely strengthen their ability to charge more for delivering Internet services over long distances.

Fitch Ratings put its ratings on Level 3 on positive watch, saying the proposed deal would increase its competitive position by improving the breadth and depth of the company's services, positioning it to expand and broaden its customer base, including "large multinational enterprise customers."

The agency also said the deal will reduce Level 3's leverage and improve its credit protection and free cash flow, assuming the company can achieve the annual $340 million in cost synergies it predicted. Fitch called that a reasonable target.

Fitch said the success of the combination will hinge on how Level 3 manages the integration process and limits disruption to the company's overall operations.

Fitch's issuer-default rating on Level 3 is currently B-, six notches below investment-grade status.

Separately, Moody's said it too was reviewing Level 3--which it rates at Caa1, seven notches into junk--for a possible upgrade.

It also noted how the deal would reduce leverage and improve free-cash flow, the primary impetus for the review. It said free-cash potential is the key to a rating move. "Depending on the combined entity's capital expenditure intensity, Level 3's historically lackluster free cash generation will be bolstered and further de-levering may be possible," Moody's said.

The agency said its review would "focus on the magnitude and timing of synergies, the costs of achieving them, related execution risks, liquidity planning and the combined entity's credit profile."

It said its review would conclude around the time the deal is expected to close, near year's end.

Later Monday, Standard & Poor's Ratings Services said its rating on Level 3 ( currently at B-, like Fitch) was now on watch with positive implications.

It said expected leverage reduction was the main motivation for reviewing the rating. However, it said an upgrade of Level 3 would largely depend on the combined company's business risk profile as well as the extents to which it succeeds in obtaining synergies and to which the synergies improve leverage and cash flow.

S&P said it expects to review the companies' integration plans and the basis of their synergy projections. It could resolve the watch in the next three months if it conclusion is to simply affirm Level 3's current rating. An upgrade, because it is predicated on the deal's completion, wouldn't come until the deal is closed, although the agency expects to signal its intentions within the initial three-month review period.

Level 3 shares were up 2.9% at $1.75 in after-hours trading. During regular trading Monday, the stock climbed 18%.

-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291; joan.solsman@ 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=ufw8JT6zunLjJIaPjUsk8Q%3D%3D. You can use this link on the day this article is published and the following day.

 

  (END) Dow Jones Newswires

  04-11-111836ET

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[DCG]

Can anyone explain to me in a sentence or two how they will consistently make a profit some day, or at least become consistenty cash-flow positive after capex?

 

DCG,

 

I think you have to look at LVLT this way.  You are paying something like $8-9 billion dollars for a pipeline worth $30-35 billion.  If you can fill that pipeline up with traffic before the next major refi (in 3 years), your company will gush torrents of free cash flow that will make your purchase at $8 billion seem like a wonderful price.  Especially when that FCF will be shielded from tax by huge prior operating losses.  If it doesn't fill up, then you could have spent $100 billion on your pipeline and it doesn't mean squat -- you are going to lose money and have to keep diluting your SHs to buy time on your debt.  So, the relevant question is not LVLT's past performance based on unfilled pipelines, but whether they can fill up their pipeline going forward and do so in a reasonable time frame.  If the pipelines fill up -- the profits will definitely come.  In fact, new revenue gets translated to profits at something like 60%.  But, of course, the key word is "if".  That is the only reason why you can buy a $30-35 billion dollar pipeline today for a fraction of that cost.

 

Thanks for the explanation.

 

I agree that there are still a lot of 'ifs' with this company, which is why I'm surprised about the amount of pure optimism in this thread (almost to the level of some Yahoo Message Board threads) (and denial that a chunk of the recent huge move in the stock price is momentum driven). Some people people on here are acting as this is an amazing company/stock that can do no wrong, while it is really a quite speculative company that was basically a penny stock on the verge of being delisted only about 5 months ago.

[Guest ValueCarl]

DCG, do you want the Kiss of Death? Here you go! He calls it Level Crossing and looks DRUNK at the beginning as he opines that he could never TALK about UNDER two dollar stocks on his "Mad Crowd Disease" program! And that punch drunk, ruddy scoundrel took my Katie Couric idea too! LOL Does Katie have the PUNCH to DRAW the crowds though? There was that sneaky jab regarding Goldman's owned LIMELIGHT in there too!

 

Truth is, we're going much higher with or without Jim Cramer YAKKING! Is there a SOCK for his MOUTH somewhere? With him, you might have to be careful when we BREAK FIVE with "past history no guarantee of future results!" LOL

 

 

http://www.thestreet.com/_yahoo/video/11078246/cramer-really-likes-global-crossing-deal.html?cm_ven=YAHOOV&cm_cat=FREE&cm_ite=NA&s=1#900166151001

[Cardboard]

Myth,

 

It is the #1 buying the #3. A very significant consolidation event. It is a big deal for underseas transmission where Global Crossing is quite large.

 

http://tech.fortune.cnn.com/2011/04/11/internets-backbone-fuses-level-3-buys-global-crossing/

 

Looks like a great deal too me although, I will have to review exactly how it impacts my target price. On the surface, it seems that it could reduce my upside due to less leverage, but it will significantly reduce risk inherent in leverage and will accelerate the timing for payoff.

 

By the way, Jim Cramer had very nice things to say about this deal and Jim Crowe.  ;D

 

http://www.thestreet.com/_yahoo/video/11078246/cramer-really-likes-global-crossing-deal.html?cm_ven=YAHOOV&cm_cat=FREE&cm_ite=NA&s=1#900166151001

 

Something tells me that this deal may never occur. Even Jim gets it that these pipes are getting filed or will get filed soon. I would not be surprised to see other offers showing up for LVLT and/or GLBC in the near future.

 

Cardboard

 

[Guest ValueCarl]

"LVLT has a pulse," according to James Cramer of "Mad Crowd Disease.Com." That's really nice, Cardboard! The Rothschild's are being nice too. I wonder if they conferred with the Rockefeller's to determine whether or not those NOL's are really good to go in their "FAIRNESS DOCTRINE?"

 

The speed to the value answer was absolutely necessary and well welcomed, Cardboard. Your comments will be interesting to witness pan out, assuming they do. Bidda, bidda, bidda, do I see Google or Microsoft vs. TREX or VZSAURUS with six, seven, eight or nine PPS while Katie Couric biz models are filling the INTERNET's PIPES!  ;)    

 

<Level 3’s advisers included Bank of America Merrill Lynch, Citigroup and Morgan Stanley. Rothschild provided the fairness opinion, and Willkie Farr & Gallagher was the legal adviser. Goldman Sachs advised Global Crossing, and Latham & Watkins was its legal adviser. Singapore Technologies Telemedia worked withCredit Suisse Securities.>

 

http://dealbook.nytimes.com/2011/04/11/in-level-3-takeover-an-opportunity-for-more-deals/

 

 

 

 

 

[brker_guy]

Carl, a quote to remember from the ST Telemedia management:

 

“This strategic combination is an important milestone for both Global Crossing and Level 3, and a value-creating proposition for all stakeholders,” Lee Theng Kiat, chief executive officer of Singapore Technologies Telemedia, said in a statement. “Going forward, we believe the combined strengths of the two companies will position it in a very favorable, competitive position to expand in the U.S. and compete globally.”

 

http://dealbook.nytimes.com/2011/04/11/level-3-to-buy-global-crossing-in-3-billion-deal/

 

 

[Guest ValueCarl]

Was it interesting that there is no mention of a "break up fee" if by some chance this deal does not consummate? Back to Cardboard theories!  ;D

[txlaw]

With that said this sucks. I miss $1. Congrats guys. Still under $2 which is my breaking point. I hope they drift back down.

 

Myth, if you're looking for an ATSG-like inflection point, this could be it.

 

The transaction removes the uncertainty in the market associated with LVLT's debt load.  There is a very high probability that the combined LVLT/GLBC's financing costs go down substantially, and the risk of failure to refi is also pretty much gone. 

 

If we actually start to get accelerated revenue growth commensurate with global growth in data traffic, then we've got a nice mix of factors that could cause revaluation in the market, i.e. a catalyst.

[Guest ValueCarl]

Don't try to help Myth. He will worry about the 40,000 or is it 38,000 other long haul "networks" that are competing with Level 3 and Global Crossing!  ;D The cost to deliver those bits with pipes filled or unfilled will always go down, down, DOWN, I tell you! LOL!  

[DCG]

You are paying something like $8-9 billion dollars for a pipeline worth $30-35 billion.

 

It seems like it would be tough for them to realize a valuation near $30-$35 billion. They have takeover value, but that would most likely happen at a much lower valuation than that. I know they've had very high market valuations in the past, especially during the tech boom, but then the market came to its senses and remember that things like earnings, profit and debt actually do matter. IMO, intrinsic value is largely speculation until there are earnings to support it.

[Guest longinvestor]

You are paying something like $8-9 billion dollars for a pipeline worth $30-35 billion.

It seems like it would be tough for them to realize a valuation near $30-$35 billion. They have takeover value, but that would most likely happen at a much lower valuation than that. I know they've had very high market valuations in the past, especially during the tech boom, but then the market came to its senses and remember that things like earnings, profit and debt actually do matter. IMO, intrinsic value is largely speculation until there are earnings to support it.

You are correct about the speculative valuations (3) carried during the tech boom. You are also correct that a lot of moving parts have to move and move in the correct ways for (3) to get to a $30B valuation. But the rear view mirror approach to looking at (3) is just as wrong today as it was at the heights of the tech boom. To get to a potential market cap for (3) one has to look the combined market cap of T, VZ, CMSC, AKAM etc, because that is the fishing pond for (3). They are doing rather well as a disruptive player. And this is not speculative at all. It is a slow grind, drag out game they are playing. It certainly did'nt help that they screwed things up in 2007. Cost us investors many years of opportunity cost.

 

The low cost capability along with unfilled pipes plus a fundamentally different macroeconomic situation today (versus 1999). eople are abandoning everything from home phones to TV's to cable subscriptions to desktop computers etc, not just because of technology and convenience but because their disposable incomes have dwindled. All this is playing in favor of (3) and against the entrenched players. 

 

Why is this taking so long and going to take longer still? Too much capital chasing too few ideas in a playing field with 50 to 100 year monopolies.

 

Arguing against the investment thesis in (3) a year back at 80 cents is just as wrong as the cheery consensus around the $132 price in 2000. 

 

 

[Myth465]

Don't try to help Myth. He will worry about the 40,000 or is it 38,000 other long haul "networks" that are competing with Level 3 and Global Crossing!  ;D The cost to deliver those bits with pipes filled or unfilled will always go down, down, DOWN, I tell you! LOL!  

 

Thanks TX.

 

Carl, I am a bit slow but I will get there.

[txlaw]

You are paying something like $8-9 billion dollars for a pipeline worth $30-35 billion.

 

It seems like it would be tough for them to realize a valuation near $30-$35 billion. They have takeover value, but that would most likely happen at a much lower valuation than that. I know they've had very high market valuations in the past, especially during the tech boom, but then the market came to its senses and remember that things like earnings, profit and debt actually do matter. IMO, intrinsic value is largely speculation until there are earnings to support it.

 

I'm not one of those guys who focuses on replacement cost to determine the value of a business.  Instead, I believe in counting the cash, as Bruce B would say.

 

I keep on harping on this, but you need to stop focusing on reported earnings and do some research into LVLT's owner earnings.  Until you do that, your opinion of LVLT's earnings is not very persuasive.  How can you determine intrinsic value if you've not done the homework?  How can you determine whether putting money into LVLT at current prices is a speculation versus an investment?

[Guest ValueCarl]

You're far from slow, MYTH! And, I'm sure your a lot farther ahead than silly me might think otherwise!  ;D Getting (3) Religion is not for the faint of heart! Brker_guy, Txlaw, Longinvestor as well as Cardboard are very smart guys that will help you keep your head on right.   

[zarley]

I'm not one of those guys who focuses on replacement cost to determine the value of a business.  Instead, I believe in counting the cash, as Bruce B would say.

 

I keep on harping on this, but you need to stop focusing on reported earnings and do some research into LVLT's owner earnings.  Until you do that, your opinion of LVLT's earnings is not very persuasive.  How can you determine intrinsic value if you've not done the homework?  How can you determine whether putting money into LVLT at current prices is a speculation versus an investment?

 

What's your definition of owners earnings?  Because a measure like operating cash flow minus capex has been mostly negative for LVLT for at least the last 10 years.  Although the last few years have been less bad than 06, 07 or 01.  Do you use some other definition that is very different from that? And, while history doesn't tell the whole story, it does tell a story.  The last decade has been consistent in one regard for LVLT, it's been a financial disaster.  Revenue flat since 2002.  Reported Earnings flat, and hovering around $600-$700 million in losses per year.  Shares outstanding diluted to the tune of 4x over the decade.

 

Given the potential for future dilution embedded in some of their convertable debt, and a history of unprofitable operations and acquisitions, how can anyone say when they'll make money, or how badly the common gets diluted by the time that it matters?  In the decade that saw the internet blossom into perhaps the most important communication tool on the planet, LVLT has derived exactly zero benefit from that growth.  By how many orders of magnitude has internet traffic grown in the last decade?  LVLT's growth has been zero.  Why is that?  When will that change?  Their story is remarkably similar from year to year over the last decade, but they haven't actually been able to profit from any of it.

 

How do you project cash flows in any reasonable way from the starting point of a decade of stagnation and mounting losses?  Maybe you can.  I don't know.  I certainly know that I can't, and that's the real trick here.  How can you say with any degree of confidence that the next decade will be significantly better than the past decade?  Perhaps priced under $1 per share it's a long-shot speculation with good odds.  But I can't see how it's much more than that.

 

It seems like LVLT is how people used to describe Brazil -- it is the company of tomorrow . . . and always will be.  The potential is so tantalizing -- a mirage of a monopoly toll-road for all internet traffic.  Yes, there are some really smart people who are invested and are believers, but I don't see it and that's all that matters to me.  Perhaps I'm just not bright enough, or haven't done enough research, but I'm looking at ten years worth of financials and it's fugly.

[brker_guy]

Carl, I agree.  Myth has done very well himself with SD.  I am very surprised that Myth understands SD's business well but not LVLT.  I think if he applies the SD Religion to the LVLT Religion, he will get it.  ;D ;D

 

With (3), one just need to have very thick skin and have the huevos to back up that truck when it falls below "intrinsic value" and "owner earnings".  The key is to figure out "intrinsic value", NOT REPLACEMENT COST, "reported profits", debt level etc...  With (3), you either get it, or you don't.

[Myth465]

Carl, I agree.  Myth has done very well himself with SD.  I am very surprised that Myth understands SD's business well but not LVLT.  I think if he applies the SD Religion to the LVLT Religion, he will get it.  ;D ;D

 

With (3), one just need to have very thick skin and have the huevos to back up that truck when it falls below "intrinsic value" and "owner earnings".  The key is to figure out "intrinsic value", NOT REPLACEMENT COST, "reported profits", debt level etc...  With (3), you either get it, or you don't.

 

This is a very good post.

 

zarley if you believe that something is worth zero because it has no earnings then this one is not for you. Similar to SD or a number of other securities. This is a turn around which may or may not be turning. You either believe in the turn or not. With most things in life timing is everything. With a pipeline you need probably 70% - 85% capacity before prices firm. If the pipeline was at 10% in 1999, and is now at 40% then that doesnt mean much. Its that last bit that counts, theoretically. This is the info I am missing actually. If I could see a schedule showing growth vs. capacity over the last decade, with projected growth to 2020, I would have that last piece of the pie now that I think about it.

 

I have looked at VIC and seen about 4 level 3 writeups all down between 85% and 95%, being early is the same as being wrong. Those who bought at 80 cents are looking quite smart. It comes down to the pipeline and when it gets filled. If you cant answer those, then I recommend putting it in the too hard pile and moving on to the other 6000 equities on the US exchanges.

 

Its fairly simple in the 90s way more optic and capacity was lied. Anyone owning the companies who lied this pipeline were killed. L3 has held on, and we are finally growing our way out of the capacity due to increased data usage (lead by social media and devices), digital storage (healthcare and government / private sector), and digital downloads of video. Once the pipes are filled prices go up. When you see a $1 in earnings this will be a $10 stock. Im sure the ones on the board will be glad to sell you some at that time. Similar to SD, XEC, or FBK just deep deep value. It seems like MSFT / Kraft / JNJ / other large caps at 8-9x earnings may be more your game, its a game I dont like much though.

 

Everything else is irrelavant. The past, the numbers, everything. Do you think the pipes will get filled, and will they be able to charge an adequate price? Thats the question you must answer. Once you have your answer please let us know and place your bet or move in the too hard pile. I am still working on this one, for me its not an if, more of a when. I started looking at $1 so that shows what I know lol.

 

----

 

I think I get it, just dont know when and dont want to be too early (or wrong), but you give up upside doing that. You are right about one thing Carl, all the smart guys are here from the board, plus Prem and Long Leaf. Somethings gatta give. I dont mind being late to the party though, as long as there is still some beer in the keg  :).

 

Pranav Mistry: The thrilling potential of SixthSense technology

Imagine the data demands when kids are doing this -

 

And many think Brazil is becoming the country of today  ;D, thats a good quote though.

[brker_guy]

Zarley, I hate to sound like a broken record, but you should have a read of LongInvestor's posts.  I think he said it pretty well.  You can not value LVLT looking into the rearview mirror.  In the past decade, LOTS and LOTS of people wanted to get into the fiber infrastructure building dream(a lot of them were merely nightmares more than dreams).... Look around you and this industry.  Better yet, just look at Qwest.  At one time, Qwest was the darling of the fiber infrastructure industry.  What was their takeout price by CenturyTel?  Your use of "Reported Earnings flat" is pretty much misguided.  

 

In the past 10 years, the demands not there.  There are three types of traffic riding on these fibers (voice, data and video).  The past 10 years have been pretty much voice and data.  Since the arrival of the iPhones and smart phones, the usage for fiber has been video.  Look around your circle of friends.  Count how many of them holding onto the iPhones or smart phones.  Then, there are those Netflix users who constantly stream 2-4Mbps of videos every night.  Soon, when TRUE HD can be had at home, that video traffic will go to 10Mbps-15Mbps PER HOUSEHOLD PER NIGHT!  All of these "revolutions of smart phones and streaming videos" just started to pick up steam since 2007.  So, if you are going to use the 10 years of data when the "demand" of BW was basing on "voice" and "data", you will have warped data and warped analysis.  VIDEO is the HIGHEST BW consumption application, hands down!

 

The only way for LVLT to get its DEBT/EBITDA down is by filling up those pipes with traffic.  The more IP traffic, the better!  So if you are going to use the quant model of "zero growth" and "flat Reported Earning", you are going to miss that passing pulse of lights.  

 

You should consider what 1% increase in (3)'s revenue will do to the EBITDA margins improvement.(hint hint: go study up on their earnings call!)  

 

"How can you say with any degree of confidence that the next decade will be significantly better than the past decade?"

 

Go ask your circle of friends to see how many of them have a Neflix account and how often they stream to watch movies.  Or just take 20Mil Neflix users * 2Mbps/MOVIE * # of Movies they watch per month * 12 months.  Then, survey your circles of friends to see how many of them own a smart phones or iPhones with data plan.  Then, multiply that number by 2GB/month by 12 months * the population of smart phones users WORLD WIDE.  Then you will seen the BW demands for Netflix and smart phones and how much of these pipes will be filled going forward.

 

And I have YET to touch on YouTube and Hulu streaming services...  Like I said earlier, with (3), you will either get it right away, or you don't.

[zarley]

Carl, I agree.  Myth has done very well himself with SD.  I am very surprised that Myth understands SD's business well but not LVLT.  I think if he applies the SD Religion to the LVLT Religion, he will get it.  ;D ;D

 

With (3), one just need to have very thick skin and have the huevos to back up that truck when it falls below "intrinsic value" and "owner earnings".  The key is to figure out "intrinsic value", NOT REPLACEMENT COST, "reported profits", debt level etc...  With (3), you either get it, or you don't.

 

This is a very good post.

 

zarley if you believe that something is worth zero because it has no earnings then this one is not for you. Similar to SD or a number of other securities. This is a turn around which may or may not be turning. You either believe in the turn or not. With most things in life timing is everything.

 

I have looked at VIC and seen about 4 level 3 writeups all down between 85% and 95%, being early is the same as being wrong. Those who bought at 80 cents are looking quite smart. It comes down to the pipeline and when it gets filled. If you cant answer those, then I recommend putting it in the too hard pile and moving on to the other 6000 equities on the US exchanges.

 

Its fairly simple in the 90s way more optic and capacity was lied. Anyone owning the companies who lied this pipeline were killed. L3 has held on, and we are finally growing our way out of the capacity due to increased data usage (lead by social media and devices), digital storage (healthcare and government / private sector), and digital downloads of video. Once the pipes are filled prices go up. When you see a $1 in earnings this will be a $10 stock. Im sure the ones on the board will be glad to sell you some at that time. Similar to SD, XEC, or FBK just deep deep value.

 

Everything else is irrelavant. The past, the numbers, everything. Do you think the pipes will get filled, and will they be able to charge an adequate price? Thats the question you must answer. Once you have your answer please let us know and place your bet or move in the too hard pile. I am still working on this one, for me its not an if, more of a when. I started looking at $1 so that shows what I know lol.

 

I agree with you 100% Myth.  It is in my too hard pile, but I still want to clarify a couple points.

 

Do I think something is worth zero because it has no earnings?  Of course not.  But, as you (and I) say, you need to know when that picture will change.  It is not within my ability to see the when, or maybe even the how much.  Will there come a day when network capacity is constrained and the money comes pouring into LVLT?  Yes, maybe.  But, when and how much?  If you can answer those questions, then great, you can start to answer the valuation question.  I cannot.  I've moved on.  But, I can honestly tell you nothing in this thread helped me answer those two questions either.  It's all innuendo and code-speak.

 

Best of luck to you on this one.  I hope you get it right

[txlaw]

What's your definition of owners earnings?

 

My definition is the same as WEB's.  Do some reading, and you'll figure it out.

 

The last decade has been consistent in one regard for LVLT, it's been a financial disaster.  Revenue flat since 2002.  Reported Earnings flat, and hovering around $600-$700 million in losses per year.  Shares outstanding diluted to the tune of 4x over the decade.

 

Can't disagree with much of what you said.  The question is whether the last decade is representative of the next decade.

 

Given the potential for future dilution embedded in some of their convertable debt, and a history of unprofitable operations and acquisitions, how can anyone say when they'll make money, or how badly the common gets diluted by the time that it matters?  In the decade that saw the internet blossom into perhaps the most important communication tool on the planet, LVLT has derived exactly zero benefit from that growth.  By how many orders of magnitude has internet traffic grown in the last decade?  LVLT's growth has been zero.  Why is that?  When will that change?  Their story is remarkably similar from year to year over the last decade, but they haven't actually been able to profit from any of it.

 

How do you project cash flows in any reasonable way from the starting point of a decade of stagnation and mounting losses?  Maybe you can.  I don't know.  I certainly know that I can't, and that's the real trick here.  How can you say with any degree of confidence that the next decade will be significantly better than the past decade?  Perhaps priced under $1 per share it's a long-shot speculation with good odds.  But I can't see how it's much more than that.

 

It seems like LVLT is how people used to describe Brazil -- it is the company of tomorrow . . . and always will be.  The potential is so tantalizing -- a mirage of a monopoly toll-road for all internet traffic.  Yes, there are some really smart people who are invested and are believers, but I don't see it and that's all that matters to me.  Perhaps I'm just not bright enough, or haven't done enough research, but I'm looking at ten years worth of financials and it's fugly.

 

Don't be confused about all this talk about true believers and whatnot.  

 

I and most of the smart folks who are invested in LVLT don't speculate -- unless you consider making parimutuel bets speculation.  If you do the research and understand the fundamentals of both LVLT's business and of "value investing," you should find that at $1.00 earlier this year, LVLT was far from a speculative investment.  

 

Most value investors stay away because they don't feel they can understand LVLT's business prospects.  That's understandable.  But it's irritating when an investor expresses their opinion in a way that reflects a misunderstanding of the fundamentals of "value investing."

 

When referring to LVLT, don't think toll-road with pricing power.  Think low-cost provider.

[zarley]

brker_guy, I understand the issue of increasing network use and streaming video and music.  I do, I do all of it.  But understanding that does not help me answer the question of what is it worth to LVLT.  I have seen nothing that ties internet traffic demand to LVLT pricing/revenue/profit.  Conceptually, yes it makes sense, I get it.  But, I can't put a number or a date on it, so it's not very useful to me.  Sure, all forecasting is speculation, but projecting that a profitable growing business will continue to be a profitable growing business is very different from projecting that profit that has never materialized will materialize in spectacular ways . . . some day.  That's all.  Perhaps I simply lack the creative foresight that smarter people have.  That's fine.  I'll live with my impairment and work with what I know.

[Myth465]

brker_guy, I understand the issue of increasing network use and streaming video and music.  I do, I do all of it.  But understanding that does not help me answer the question of what is it worth to LVLT.  I have seen nothing that ties internet traffic demand to LVLT pricing/revenue/profit.  Conceptually, yes it makes sense, I get it.  But, I can't put a number or a date on it, so it's not very useful to me.  Sure, all forecasting is speculation, but projecting that a profitable growing business will continue to be a profitable growing business is very different from projecting that profit that has never materialized will materialize in spectacular ways . . . some day.  That's all.  Perhaps I simply lack the creative foresight that smarter people have.  That's fine.  I'll live with my impairment and work with what I know.

 

Zarley you and I have the same issues / questions to be fair. Hell I asked many of the same questions 15 pages back. I do agree with TX though, when someone starts quoting Graham and Buffett on a deep value investment it gets annoying (I do it too though lol). I dont really need a pricing sheet showing that this capacity requires this pricing, but I do need to know where we are in relation to utilization on an industry wide basis vs. projected growth. I think it will work out like Peak Oil kind of. Once supply and demand are brought in line prices will firm. Suppliers will win, and low cost suppliers will kill. Prices will naturally go up once utilization rises. Its probably out there I just havent bothered to pull it all together.

 

The industry cant keep losing money. Something will give, they will consolidate and raise prices. New owners with lower cost basis will make money. If you bought at $15 you are screwed regardless what happens. At 80 cents you will sit pretty unless they go under. It will happen, now when is the important part.

[brker_guy]

"Best of luck to you on this one.  I hope you get it right"

 

Zarley, thanks! Best of luck to your research.  My cost basis is below 92 cents along with notes that I bought back in 2008 at 50 cents on the dollar.  So, the stream of dividends from the notes were used to buy more shares last October/Nov.

 

"Once supply and demand are brought in line prices will firm. Suppliers will win, and low cost suppliers will kill. Prices will naturally go up once utilization rises."

 

Myth, this is already starting to happen.  With the take out of Qwest last year, we are seeing players jockeying for position.  Look at Sprint.  They have the 4th or 5th most AS, and I think they will be taken out by somebody.  I was hoping that Sprint would sell their wireless to VZ and the internet infrastructure to (3), but that hasn't happened yet.  Better yet, I think Google or MSFT should gobble up Sprint and (3) to take on those monopolists...  Now, that would be a game changer for everyone, including the consumers!

[Myth465]

Level 3 needs a really good powerpoint presentation. What they have going on now sucks. They could tackle all of these questions with one badass presentation.

 

WDC was able to spell things out with a solid PPT.

SD has great PPTs, even Fibrek has come around lol.

 

Perhaps I am just being lazy. brker, I am getting there though.

[txlaw]

My cost basis is below 92 cents along with notes that I bought back in 2008 at 50 cents on the dollar.  So, the stream of dividends from the notes were used to buy more shares last October/Nov.

 

Wow.  Rub it in, why don't you. ;D

 

I was hoping that Sprint would sell their wireless to VZ and the internet infrastructure to (3), but that hasn't happened yet.  Better yet, I think Google or MSFT should gobble up Sprint and (3) to take on those monopolists...  Now, that would be a game changer for everyone, including the consumers!

 

I also thought that Sprint might sell their wireline business to LVLT.  I mean, they need to get rid of it at some point.

 

Here's what I would like to see happen, all as part of one transactiondeal:

 

-Sprint sells its wireline business to somebody -- perhaps CenturyTel, as per Rob Powell.  

-Sprint combines with Clearwire in a stock for stock transaction, with the Strategic Investors (e.g., INTC and GOOG) now owning a small chunk of Sprint

-The same Strategic Investors should provide either equity to Sprint or low interest convertible debt that converts at a fair price that will gives the Strategic Investors a great return over time

-The Strategic Investors, in agreeing to a Clearwire combination, extract an agreement from Sprint to be open network and net neutrality friendly

 

Not sure whether the cable cos would agree to this sort of transaction.

 

Alternatively, Sprint has to change the wholesale pricing deal so that it gives CLWR a clear path to profitabilitty and figure out a way to line up financing for CLWR to build out the rest of the 4G network.  Also, Sprint and CLWR should make it clear how both will share the benefits of the Network Vision plan.

 

Disclosure: I'm now long CLWR.