Technology companies are usually popular stocks to speculate in as a result of their high growth possibility. Just examine Apple ? that company has made its shareholders an enormous amount of cash. However, identical to with the other sector, there are potential highfliers, after which there are the duds. Let?s have a look at how Level 3 Communication (Nasdaq: LVLT??) stacks up.
Cheap ? but worth it?
Currently, Level 3 Communications ? a communications company offering broadband, network, Internet, and media services ? is trading around $1.88, which seems cheap if you compare it with its high of $117 in the course of the dot-com bubble of 2000. But is there a reason it?s priced so low?
Unfortunately for investors, Level 3 Communications has some of red flags related to it. Since failing to lease enough bandwidth to companies like verizon Communications (NYSE: VZ??) , and BellSouth in 2001 after building nearly $10 billion worth of recent pipes, Level 3 Communications have been plagued with problems.
In recent years Level 3?s total net income has steadily climbed ? negatively. Since 2008, net income has gone from -$318 million to -$622 million in 2010, and operating income has followed right along inside the negative digits.
On the positive side, cash flow runs with reference to break even, but if you concentrate on Level 3 Communications? debt level is growing ? from 2009 to 2010 long run debt grew from $5.8 billion to just about $6.4 billion, and its interest coverage ratio sits firmly in negative territory ? there?s still various risk a few of the company?s financials.
Lastly, Level 3 Communications just announced a merger with Global Crossing, an unprofitable company, for $1.9 billion with the hope that cost savings can assist rectify Level 3 Communications? troubled financials. Regrettably, mergers rarely provide the savings mangers believe they?ll.
Hope for the longer term?
Although Level 3 Communications has had a lower than stellar past, there is hope for the long run because it tries to expand into content delivery networking, or CDN. For instance, Level 3 Communications has already scored a lucrative deal to be the principle content delivery network provider for Netflix (Nasdaq: NFLX??) .
On the flip side of that coin, as Level 3 Communications expands into CDN, it?s going to ought to compete with competitors like Akamai Technologies (Nasdaq: AKAM??) , AT&T (NYSE: T??) , Internap Network Services (Nasdaq: INAP??) , and Limelight Networks (Nasdaq: LLNW??) . How Level 3 Communications will fair against its competitors has yet to be determined, but it surely has managed to takeover Akamai?s position because the primary CDN for Netflix from Akamai. Perhaps that?s an indication that there is hope for this floundering company?
Uncertainty is the name of the game
Th ***a***ere?s always the prospect that Level 3 Communications can be ready to turn things around ? CAPS players appear to think it is going to. But observing the issues it?s currently facing, a turnaround goes to be tough.
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Source: http://www.newtelecomblogs.com/2011/08/12/is-that-this-technology-stock-the-following-big-thing/
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