Well, I can’t say it was unexpected. The news out of Level 3 Communications (NYSE:LVLT, news, filings) this week is a round of layoffs. According to the Denver Post the number is 700, or 6.5% of the company’s global workforce, with 150 in Colorado and the rest spread out around the rest of the world.
I have been hearing rumors of this move for about a month and as painful as it is, it was also obviously on the horizon for quite some time. After the Global Crossing deal, the integration process was surprisingly light when it came to headcount reduction. One got the sense that they were hoping to grow into the size of their labor force rather than immediately slash and then rebuild later.
However, while they’ve been working very hard to improve the company’s rate of core revenue growth Level 3 just hasn’t been enough to generate enough momentum. Enterprise revenues have been doing quite well, but wholesale has not and the UK government headwinds haven’t helped either. Hence the 6.5% haircut, looking to bring costs inline with the reality of their current revenue levels.
As for the timing, Level 3 is approaching the actual break-even line, and a round of layoffs now is clearly timed to push them solidly over the hump for Q4. With the debt refinancing costs earlier this month plus severance for this week’s RIF, the third quarter’s EPS will surely be one-timed downward a bunch. But in the fourth quarter, the numbers all start to come together.
Of course, that may make some investors happy but it will be cold comfort to the affected employees. But at least the job market isn’t quite as ugly as it was a couple of years ago, good luck to all.
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