The largest shareholder of Level 3 Communications says it is disappointed by the Broomfield-based company’s financial performance and indicated in a report to shareholders that it may seek change.
“We are unhappy with Level 3’s operating results and stock price,” top executives at Southeastern Asset Management wrote in a report filed Friday with the SEC. “You can assume that we are neither oblivious nor idle.”
Southeastern, headed by Mason Hawkins, holds 29 percent of Level 3′s common shares. Level 3, which operates a fiber-optic communications network, received a delisting warning this month from Nasdaq after its shares traded for less than $1 for 30 straight days.
Hawkins’ remarks were first reported by Bloomberg News. The letter was addressed to shareholders of Southeastern’s Longleaf Partners Funds.
Hawkins and Southeastern president Staley Cates added that Level 3 has been slow to add new customers:
Level 3 has irreplaceable fiber assets, and demand for bandwidth is growing rapidly with the increasing movement of data and video across multiple platforms. The company’s pace for adding new direct customers has been disappointing. The contribution margin from increasing top line growth is substantial. Translating obvious demand into strong organic revenue growth in the near term will determine success.
Level 3 disclosed about two weeks ago that it secured a contract with movie-rental firm Netflix, and its shares have closed above $1 since that announcement.
Level 3 indicated in May that it may resume acquisitions, and analysts had speculated that a merger with Global Crossing would make the most sense. But a deal, which would have had to include a stock swap given Level 3′s massive debt load, apparently couldn’t be hammered out.