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Level 3 Plans Software Spin-Off

Network operator Level 3 Communications will spin off its software and services group as a public company called Technology Spectrum.

Technology Spectrum will trade on the NASDAQ under the "TSPE" ticker symbol. Neither the offering date nor share price has been set. Level 3 Financing, another Level 3 subsidiary, is the sole seller of the stock and will receive all the proceeds.

The new company will be based in Plano, Texas, and consist of two divisions serving enterprise customers: Software Spectrum, a direct marketer of software; and (i)Structure, a provider of IT infrastructure management services. Both units were originally founded in the 1980s.

Technology Spectrum's main business is licensing 18,000 software titles to more than 5,600 corporate customers. According to regulatory filings, it's the largest reseller of Microsoft enterprise software in the United States and also has deals with Adobe, IBM, Novell, Sun and others.

This segment is expected to stay strong. Technology Spectrum cited IDC research predicting indirect enterprise software sales will outpace direct sales over the next three years, with compound annual growth rates of 8.8 percent and 6 percent, respectively.

The other line of business for Technology Spectrum is IT infrastructure management. The company operates data centers in Omaha, Neb., and Tempe, Ariz., and provides a range of services to 43 corporate customers.

In 2004, the company posted an overall profit of approximately $10 million on revenue of $1.93 billion.

Level 3 of Broomfield, Colo., formed its software and services group in 2002 after acquisitions. The IPO allows it to hone its focus. The fiber-optic network operator sells wholesale dial-up service to ISPs in North America and broadband access through cable and DSL providers.

It's also moving to establish a strong position as a provider of Voice over IP traffic. Recently its services helped AOL launch its VoIP application.

A Level 3 spokesman was not immediately available for comment.