Yesterday, Level 3 stock surged a few dollars on the backs of a bit of good old fashioned rumor and speculation. Benzinga reported to its users that Level 3 is considering strategic options that range from a stock buyback to a sale of the company. Follow-on reports quickly brought in the suggestion of an eventual buyout by Comcast, which Cowen’s Colby Syneseal speculated about at the end of last year.
Now, pretty much all companies spend time considering how to be more valuable in the eyes of the market, and now that Level 3 is making money and its debt is no longer the outsized burden it once seemed, a stock buyback definitely seems in order. But making a move to sell the company still seems rather premature. After being one of the lone survivors of the dot-com era, deep down Level 3 still believes it can win this game if it can just crack the final problem of revenue growth.
As for Comcast as a buyer, they would certainly be on any short list of candidates and probably at the top of it. In order to really crack the large enterprise market, they will likely need to make such a move someday. But they don’t appear to be in any hurry, and the speculation that such a thing is in the works also seems, well, premature. After all, it’s not as if the rumors suggest actual buyout talks. Could it happen? Sure, Comcast has the resources and everyone has their price. But I rather doubt the two companies could agree on that price at this point in time.
But the rumors themselves suggest that the market’s interest in infrastructure remains pretty strong right now, which is a good thing. The market will be taking a close look at Level 3’s second quarter results in a couple weeks for signs of any of these strategic alternatives or perhaps even some additional revenue traction.
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