Level 3 is out
The first item on my calendar of companies to look at was Level 3. Why? Mainly because a friend commented on my Wired Investing post with some info on Level 3:
_I’m not convinced of Level 3 at all. Having visited their (totally empty) hosting centers and seeing them disappear as fast as they appeared in the first place doesn’t sit well with me. Their business model might have changed, but I wouldn’t be surprised if their yearly reports still states that the largest amount of the incoming comes from coal mining (not kidding, that’s what they used to do)._
They did change their business model and have grown nicely in their new business, with coal mining only coming in at about 80 million USD in revenue, while the total company is now at 3 billion (2003). The problem is, that their discontinuing business (coal mining) is the only one producing a real profit. On top of that, they still have almost 6 billion USD in debt and a market cap of 2.5 billion USD with shareholder equity coming in at 181 Million USD in 2003 and having shrunk (!!!) in the first quarter of 2004.
No matter how I twist the numbers, I do not know how to get this baby profitable. With almost no expenditure on PP&E, amazingly better cash management and out of this world growth, I do not see an amazing value for shareholders, no matter where we stand today. I probably made a mistake somewhere, but one small mistake shouldn’t make the entire idea fall apart. So I am out.