Another Software Company for Level 3

Level 3 Communications Inc. , officials announced
Thursday the $122 million purchase of Software Spectrum Inc., pending shareholder approval.

The Level 3 buyout comes just a couple months after it finished the
acquisition and integration of another software distribution company,
Corporate Software. The two companies, along with (i)Structure, will
provide back office services to Level 3’s large customer base — as well as
its own clientele.

In a sweetheart deal for shareholders (who might have been nervous about
attaching their hopes and stock success to a carrier post-Global
Crossings), Level 3 is buying out the company at $37 a share. That’s more
than double the software company’s stock value after the market closed
Wednesday night.

Software Spectrum’s value climbed 118 percent in Thursday trading to
$36.27 on the announcement. The board of directors on both
sides approved the merger, and many shareholders have already promised to
vote in favor of the proposal, which should become effective in the third
quarter of 2002.

James Crowe, Level 3 chief executive officer, said the merger is part of
his company’s strategy to expand past the strictly bandwidth-centric role
of a communications carrier.

“Over the past few months Level 3 has moved to significantly expand its
information services business,” he said. “We are doing so in order to take
advantage of important economic and technology trends, including the
continuing convergence of the broadband and software distribution
industries. “The agreement announced today is a key part of that effort.”

Two years ago, Level 3 and many of the other “carrier’s carriers” in the
U.S. were forced to look at their business operations in wake of the telecom
meltdown that shut down many online businesses and service providers.

Seeing his company’s value plummet on Wall Street, Crowe knew the only way
to accomplish
a turnaround
was to expand the services Level 3 provided, from a
pure-play bandwidth provider to one that provided infrastructure to go
along with the network backbone.

That meant buying up companies like Corporate Software and Software
Spectrum, companies that could deliver solutions that many Level 3
customers would rather outsource.

According to Crowe, today’s businesses have to find the best value to
return a profit, resulting in the need for low-cost computing, storage and
communications. Providing services in-house can be an expensive
proposition, he said, given the rapid change and improvements in
technology. The solution: Level 3’s all-in-one package.

Though the initial investment (acquisitions) will be expensive, Crowe feels
the end result will be a stronger communications provider.

“Over time, improvements in communications technology will continue to
drive down the price of moving information and allow businesses to buy
software functionality and data storage as a commercial service accessed
remotely over broadband networks,” he said. “We believe Level 3’s
acquisition of both Software Spectrum and Corporate Software will enable us
to capitalize on this long term trend.”

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