Level 3 to Cut 1,400 Jobs
Says 20 percent of current recurring revenue base is at risk

June 18, 2001 -- IP network builder Level 3 Communications today announced sweeping cutbacks designed to save $2.3 billion in cash, a move the company said was driven by continuing market deterioration.
The Broomfield, Colo.-based company, which currently has 5,900 employees, said it will lay off 820 workers in North America, 550 in Europe and 30 in Asia. Level 3 will take a one-time charge of about $100 million for the second quarter.
While second-quarter results will be "substantially in line" with estimates, Level 3 lowered its sales projections for fiscal 2001 and 2002. The company now expects revenue this year of $1.53 billion, down from previous estimate of $1.62 billion to $1.72 billion. In 2002, Level 3 expects revenue of $1.92 billion to $2.02 billion, compared to an earlier projection of $2.52 billion to $2.72 billion
The staff cuts were widely anticipated and followed several weeks of market rumors and media speculation .
"Over the past two months, we have experienced a reduction in the growth of recurring revenue," said Level 3 CEO James Crowe. "As a result, we have updated our business outlook consistent with our views regarding the severity and duration of the economic slowdown. While it is difficult to predict with any certainty, we, like many industry observers, anticipate a recovery in late 2001.''
Level 3 also lowered its revenue guidance for coming quarters, saying continuing customer failures have placed 20 percent of the company's recurring revenue at risk. As a result, the company hopes to shift its customer base almost entirely to large, financially stable corporations, reducing its exposure to "early-stage" companies.
"We believe the near-term market for wavelengths and high speed private line services exceeds $15 billion and is dominated by approximately 300 companies,'' said Kevin O'Hara, Level 3's president and chief operating officer. "Further, we believe the top 40 global users represent a substantial portion of this global demand. Today, 33 of these 40 companies are existing customers for various Level 3 services."
The company hinted that is prepared to take further steps in order to survive the current market slump.
"Given the uncertain duration of the slowdown, we are also evaluating a number of contingency plans to ensure that we emerge from the slowdown positioned to benefit from the opportunities that will undoubtedly emerge," said Crowe. "Our overriding goal is to be well positioned to prosper when the industry recovers.''