Next Level sinks on warning, downgrade

Next Level Communications (Nasdaq: NXTV) shares dropped over 30 percent Friday after the company warned for its fourth-quarter and received negative reactions from analysts.

Shares in the communications equipment maker fell 3.31 to 7.5. After market close Thursday, the company warned of a wider-than-expected loss in its fourth quarter and cut its expectations for fiscal 2001, citing lower sales to Qwest Communications (NYSE: Q) and sluggish customer development in Korea.

Analyst response to the news was dour. The stock was cut to "neutral" from "strong buy" at WR Hambrecht & Co., while estimates were lowered at Credit Suisse First Boston and UBS Warburg.

Analyst Tim Savageaux at WR Hambrecht & Co. lowered his rating on the stock based on the "significant" shortfall in revenue and earnings for the quarter.

In his research note, the analyst said that, while the company has made significant progress in expanding its customer base, the uncertainty regarding the company's relationship with Qwest weighed heavily on Next Level.

"Furthermore, with the higher than expected losses coming from lower revenue levels and a likely pushout of profitability beyond the fourth quarter of 2001, [Next Level] faces a higher risk profile in terms of cash burn and will likely need to reduce expense run rates," he added.

CSFB analyst James P. Parmelee maintained a "buy" rating on the Next Level's stock, but widened the company's 2000 and 2001 loss per share estimates.

According to a research note, the lowered numbers were due to the company's slow deployment in international markets, particularly Korea. The brokerage also adopted a conservative view on the timing of increased activity at Qwest.

Parmelee said Next Level's technology and long-term viability remain strong, but noted problems in the timing of market development and selling cycles. "As such, near-term visibility remains limited pending an improved outlook at Qwest and in Korea," he wrote.

Finally, at UBS Warburg, analyst Anton Wahlman maintained a "buy" rating on the stock. Wahlman took a more postive view on the developments with Qwest.

The analyst cut revenue and earnings estimates for fiscal 2001 and 2002 and lowered that stock's price target from $30 to $10.