Crystal Balls Get Fuzzier

WorldCom's rapid descent into bankruptcy underscores the difficulty of discerning the future of the telecom sector. Back on June 24, industry observers could have named a handful of companies that faced bankruptcy within a month. WorldCom, shaky balance sheet and all, wouldn't have been among them. As the battered industry seeks to digest the impact of WorldCom's bankruptcy, how do the would-be survivors prepare for whatever comes next? It's a tricky business, as the folks at Level 3 can tell you.

In its earnings release last Thursday, Level 3 was blunt about its inability to predict what may come next. "Our ability to project future results is subject to increased uncertainty," CEO Jim Crowe said. "Previously, we had indicated that we believed our ability to project our results was improving. However, we are currently seeing mixed signals in terms of the indicators related to revenue and cash flow growth."

On the plus side, Level 3 reported a slowdown in customer disconnects and a pickup in sales proposals and RFPs. But new sales were "significantly lower," especially for the IRU contracts that have become controversial. Then there's the "headline fatigue" issue.

"The events of the past quarter, including the highly publicized turmoil in the communications industry, have contributed to customer uncertainty and longer sales cycles," said Crowe. And that was before WorldCom's bankruptcy filing.

If Level 3 can't see the future, where does that leave the rest of the business? Pretty much the same as before - putting one foot in front of the other, looking for the next right thing to do. That often means balancing immediate crises with long-term goals. Note that the same day Level 3 was declaring its inability to project future results, it was bidding on part of Global Crossing's network.