Level 3 ( LVLT) rose before the bell Wednesday after reporting a narrower-than-expected loss on surprisingly strong revenue. The network backbone provider said it lost $63 million, or 9 cents a share, on revenue of $918 million in the quarter, compared with a loss of $147 million, or 22 cents a share, on revenue of $899 million in the first quarter of 2004. The most recent quarter included a gain of 22 cents a share from the elimination of capital lease obligations. No year-ago results were included in the company's earnings release. Excluding a one time gain of $147 million, Level 3's second-quarter loss was $210 million, or 31 cents a share. That's wider than the previous quarter, but slightly less than what analysts were expecting. Analysts had expected Level 3 to lose 33 cents a share on revenue of $859.3 million in the second quarter. The stock rose 11 cents, or 3.5%, to $3.24 in Instinet premarket trading. The company's second-quarter communications revenue was $391 million, while information services revenue was $503 million. Cash and marketable securities fell to $957 million at June 30, 2004, from $1.1 billion three months earlier. Level 3 stood by its 2004 estimate for communication revenue in the high single digits in 2004 compared with 2003, and said it still expects consolidated adjusted operating income before depreciation and amortization in 2004 to be consistent with the 2003 level. It lowered its growth estimate for adjusted OIBDA in its communications segment to the mid-20% range from the high-20% range, citing higher-than-expected network expenses related to several data-carriage transactions.
"While these managed modem transactions put short-term pressure on our communications margins, the longer-term benefits of improved cash flow, network reliability and customer service that will result from the migration of this traffic onto the Level 3 network are significant," the company said.