Bust 1.0 Still Haunts Boom 2.0

Call it the evolution of a tech-bubble story line: After the close-up profiles of the early lotto winners have run their course, you can almost bet on reporters turning to the old look at the arms merchants strategy, which today means peering into the guts of the new online world for second-round success stories.

But hopeful headlines can’t hide the fact that even in a new boom, selling telecom infrastructure gear and services is a tough business, and one that is still trying to shake off the sins of the past. Witness today’s profile of Level3 in the Wall Street Journal (subscription required), which tries hard to put some gloss on what is really a long, hard slog for LVLT, one that readers of this blog have been alerted to time and time again.

If you don’t have a WSJ online subscription, some excerpts from the top of the story, which is headlined “Level 3 Regains Luster Amid Web-Video Boom”:

Fiber-optic network operator Level 3 Communications Inc., a high-flyer during the telecommunications bubble, almost went bankrupt after the sector burst in 2000. Now, it is back, with a stock price that has almost doubled in the past year and bond prices that have risen about 20%.

It isn’t until a couple paragraphs later that you are told:

But there are reasons to be wary: The company remains saddled with debt, it is in a business that still has excess capacity, and it has reported a quarterly profit just once in its more than 20-year history.

An accompanying graphic, which shows a mountainous stock-price peak in 2000 (its high was north of $120 per share) followed by a flat-line of single-digit prices since 2001, makes you wonder where the “Luster” in the headline comes from. (Doubled in the past year, maybe, but when you are near zero doubling down is not so hard.)

As it rolls on, the Journal article drifts farther away from the shine, noting that Level3’s own management says that video traffic won’t be a significant revenue-generator for at least a couple years. Still, that hasn’t kept LVLT from tooting its own Web 2.0 horn, missives that have caused some angina around these parts.

What we say: Less luster, more cleaning on the bottom line. As for that story linked at the top, which actually quotes an analyst using the “bet on the arms merchants” line? One of its “promising player” picks is telco supplier Juniper Networks, “which is making inroads with telcos gearing up to launch Internet protocol TV.” Let’s see how promising JNPR looks after Wall Street digests its near billion-dollar burp Wednesday, another painful reminder that the excesses of Bubble 1.0 are still causing heartburn.