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Level 3 shares jump on Verizon deal

The broadband supplier inks a deal with Verizon Communications to provide services for its network hubs, a sign for investors that the company may remain viable.

Level 3 Communications has inked a deal with Verizon Communications to provide broadband services for its network hubs. Investors took the deal as a sign that Level 3 would remain a viable company.

Shares in the broadband infrastructure supplier were up 49 cents, or more than 13 percent, to $4.14 by market close Monday, after hitting a high of $4.56 earlier in the day. Verizon shares were up 65 cents to $55.90.

Level 3 announced the "multimillion-dollar agreement" Monday but declined to say exactly how much the deal was worth.

Under the terms of the deal, Verizon's Global Solutions division will use Level 3's co-location and private-line services. Global Solutions, which is responsible for assembling Verizon's new network, will house switching and transmission equipment in Level 3's centers in Los Angeles and Miami.

The actual details of the pact weren't necessary because the "deal may help alleviate concerns regarding Level 3's viability," SG Cowen Securities analyst Ping Yu wrote in a research note Monday. Despite announcing on July 6 that it had enough cash to last it to 2004, the company has been plagued by beliefs that it could face bankruptcy.

Shares of Level 3 have fallen 63 percent in the past quarter, after an announcement June 18 that revenue would be lower than expected for the next two and a half years. At the time, the company also said it would cut about 1,400 jobs, or 24 percent of its work force. That was the second time in three months it had announced layoffs and cut its growth outlook.

First Call expects the company to report a loss of $2.04 a share in its upcoming second-quarter report. Analyst Tavis McCourt at Morgan Keegan predicts a loss of $2.20 a share including $135 million in one-time charges.