There’s no question that Level 3 Communications Inc. is having a tough time financially. But its answer — dismissing CFO Sunit Patel and hiring a firm to find someone with more “operational and financial management” skills — is causing some skepticism on Wall Street about whether that’s the right way to go.
Monday, after CEO James Crowe announced plans to replace the CFO he called “a trusted colleague and a close friend,” Level 3 stock took its steepest dive in more than two months, Bloomberg News reported. And shares have continued lower today. The news service noted that Level 3 has lost money for eight years straight.
Meanwhile, the Broomfield, Colo., Internet communications company continues to work through Menlo Park, Calif.-based CTPartners to find a new CFO, while hoping that Patel will stay on “in a new role.”
Patel has seen disruption in a finance department before. From 1997 to 2000 he was treasurer of MCI WorldCom Inc., having come to WorldCom through the acquisition of MFS Communications, of which he was treasurer. MCI WorldCom later collapsed in scandal, with CFO Scott Sullivan, CEO Bernard Ebbers, and others going to jail.
Before coming to Level 3 in 2003 and taking the CFO job shortly thereafter, Patel was CFO and a co-founder of Looking Glass Networks Inc., a provider of metropolitan telecommunication transport services.
In his early years at Level 3, Patel helped design the company’s “shareholder friendly” performance-based stock options, an area in which it was a leading practictioner.
In the Level 3 press announcement Monday, Crowe said he hoped “to convince Sunit to remain with Level 3 in a new role.” The CEO said he was “particularly pleased that Sunit has agreed to stay with us while we are conducting the search,” and added, “Whatever Sunit decides to do, I know that he will be a great success.”
Patel responded through the Monday press release that he prided himself on his Level 3 work and his relationship with Crowe. Patel said he would “use this period to carefully consider the opportunities that lie ahead, at Level 3 or elsewhere.”
Yesterday, Level 3′s share price was off 11 percent, to $4.36, when trading closed, according to Bloomberg. This morning, it hit a low of $4.21.
The news service quoted analyst Qaisar Hasan of Buckingham Research Group in New York as saying that “the CFO being asked to resign is never a positive,” and adding that he saw the change as “additional confirmation” that Level 3 could miss its 2007 and 2008 forecasts.
Patel was said to be in meetings all day and unavailable to comment further. A spokesman for Level 3 told CFO.com that the company wouldn’t comment beyond the press release.