Something To Crowe About

Sometimes honesty truly is the best policy.

An open letter Tuesday by Level 3 Communications, Inc., Chief Executive
Officer James Crowe to stockholders resulted in a two-point surge in
morning trading on Nasdaq’s listing.

Initial response, in the form of Level 3’s stock value,
met with favorable results the morning of the open letter’s release. The
stock climbed 6 percent, to 37.109 after Monday’s closing of 35. The
stock’s value is still well below the company’s 52-week high of 132.250.

The letter, prompted by a steady decline in the international backbone
provider’s stock price, clarified its revenue projections and Level 3s
belief that its business model was sound.

In his letter, Crowe said changes in the telecommunications arena are
occurring at a breakneck speed, with only those companies that can keep up
the pace succeeding. The growing number of competitive local exchange
carriers and startup backbone providers will take up any slack left by
large companies like Level 3.

He pointed to the recent AT&T breakup into four components as proof that
big companies need to change to meet the challenge in the coming years, or
else suffer a fate similar to IBM in the 1980s.

IBM held the reins in the PC industry, controlling nearly every element in
desktop PC software and hardware production. Complacency led to its fall
from grace by up-and-coming youngsters Intel Corp. and Microsoft Corp.

In his letter, Crowe said:

“As the communications industry goes through a similar evolution, we
will see companies struggle to redefine and reposition themselves. Until
the winners and losers in this process become apparent, investors may see
continued stock price volatility across the industry and even across the
board reductions in valuations.

Therefore, we believe the right question to ask is, ‘What companies will
emerge with the right business plan, sufficient capital and the right team
of people?’ Those who are well positioned, with access to capital, will
have tremendous opportunities. Those who don’t will struggle.

“We continue to believe that we are exceptionally well positioned, and we
continue to believe that we are at the threshold of one of the great
opportunities in business.”

Level 3’s third quarter results Oct. 18 were met with criticism by
stockholders and analysts alike, resulting in the company’s continued drop
in stock value. Level 3 reported a loss of $351 million in a quarter that
also saw it sell off of its 50 percent ownership in Walnut Creek Mining Co.

Crowe told shareholders the company plans to increase spending in 2001, a
brave move considering Level 3 didn’t soften the blow by revising next
year’s projected revenue expectations.

“My answer is that we remain confident in our ability to earn a superior
return on our invested capital,” Crowe wrote. “The reason we have not
updated 2001 revenue projections is not concern over 2001 performance, it
is our longstanding commitment to provide the best, most thoughtful
guidance that we can.

“In conclusion, many of the industry events that we had envisioned over the
last few years have, in fact, occurred. We believe that the assets we have
created — and the team we have built — position us exceptionally well
going forward. We remain firmly committed to delivering exceptional value
to you, our fellow stockholders, and appreciate your trust and continuing
support.”