Level 3 unloads outsourcing arm

After reporting disappointing third-quarter earnings last week, network operator Level 3 Communications Inc. Wednesday sold its outsourcing subsidiary for $81.5 million to Infocrossing Inc., a technology and business process outsourcing provider.

The proposed deal for Level 3's (i)Structure LLC business is an effort by the company to shed itself of what it termed noncore businesses. Once the sale is final -- expected in the fourth quarter of 2005 -- (i)Structure's 300 employees will become employees of Infocrossing, which currently has almost 550 workers. (i)Structure has IT operations in Omaha and Tempe, Ariz.

"While we have been pleased with the performance of the (i)Structure subsidiary, the operation is not a core business for Level 3," said Charles C. Miller III, chairman of Level 3's information services group, in a statement. "Because of the strong fit with Infocrossing, we believe this combination makes a lot of sense for both companies."

Level 3 Communications, reported consolidated revenue of $799 million for the third quarter, compared with $910 million for the second quarter of this year. Communications revenue was $364 million in the third quarter, versus $371 million for the previous quarter. Information services revenue was $415 million, compared with $520 million for the previous quarter. The net loss for the third quarter 2005 was $204 million, or 29 cents per share, compared with a net loss of $188 million or 27 cents per share for the previous quarter.

Level 3 has also been in the news recently regarding a spat with fellow services company Cogent Communications Group Inc. over a peering agreement. Earlier this month, Level 3 terminated its peering agreement with Cogent, a step Level 3 says it took after months of fruitless monetary negotiations and warnings. Peering is a service agreement among Internet service providers, which directly connect their networks and exchange traffic without charge.

The action left some customers on each vendor's network unable to reach certain sites that depend on the other vendor's network. The dispute has been settled -- for now anyway.

This story, "Level 3 unloads outsourcing arm" was originally published by Network World.

Copyright © 2005 IDG Communications, Inc.

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