Level 3 ( LVLT) shared dipped after the company reported another big loss despite stronger-than-expected sales.

The Broomfield, Colo., wholesale telecom shop posted a loss of $201 million, or 23 cents a share, compared to a loss of $168 million, or 20 cents a share, in the first quarter. Excluding one-time items, Level 3's adjusted loss was about 18 cents a share on sales of $1.53 billion.

Analysts were looking for a pro forma loss of 21 cents on $1.35 billion in revenue for the second quarter ended in June.

One positive sign for Level 3 was wider gross margins for its phone business. The second-quarter gross margin was 53%, up from 51% in the first quarter.

Looking ahead, the company predicts its third-quarter core communications sales will be about $857 million, a 5% increase from the $819 million in the second quarter.

"The strength of our business in the first two quarters this year bodes well for the balance of 2006 and beyond," CEO Jim Crowe said in a press release Tuesday.

Last week, the company said it had a $287 million deal to sell its software reselling unit to Insight Enterprise. Level 3 expects the transaction to close in the third quarter.

Level 3 fell shares fell 6 cents to $4.30 in premarket trading Tuesday.