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Level 3 Communications Inc. (NASDAQ: LVLT) announced its acquisition of Servecast, an Irish broadband and mobile video provider for $45 million. In terms of the cost of this deal, I wouldn't think much of it. This clearly wasn't an acquisition meant to quickly bolster Level 3's financial figures, considering Servecast only had $5 million in sales in 2006. However, this acquisition should help LVLT in its battle against Akamai Technologies Inc. (NASDAQ: AKAM) in the web video space, even if it is not as significant as the Savvis acquisition. According to one analyst at a hedge fund I spoke to, although this acquisition is rather small in terms of size, he is "sure it will help" as the company becomes a more formidable competitor to AKAM. Anyone who has followed AKAM over the last two years realizes how lucrative the web video space is in today's "Web 2.0" age in which online video is becoming more prominent by the day.
But this isn't what all of you care about! You want investment ideas! While the stock isn't appealing to the deep value investor in me (low multiples, hopefully low debt, etc.), the stock is very interesting and I believe it has tremendous upside potential in the next year and a half as the company's acquisitions finally come to fruition and integration is completed.
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