Level 3 Sells Software Spectrum Subsidiary

Level 3 Communications (News - Alert) has agreed to sell its wholly owned, business software and mobility solutions reseller subsidiary, Software Spectrum, to Insight Enterprises for $287 million in cash, the companies announced Thursday.

The deal puts Level 3 on the seller’s side of the M&A table for a change. In May, Level 3 capped off a string of acquisitions with the $1.24 billion acquisition of competitive local exchange carrier TelCove. That deal comes on the heels of Internet backbone provider’s billion-dollar shopping spree when it absorbed WilTel and its Vyvx subsidiary for nearly $700 million last year and Progress Telecom for roughly $150 million as well as ICG for $163 million already this year.

Software Spectrum caters to medium and large-sized organizations. Level 3 acquired the business a few years back and combined it with CorpSoft to form its Information Services Business Segment in 2002. The purchase price is subject to customary working capital and certain other post-closing adjustments. The sale is subject to regulatory approval as well as certain other customary closing conditions, and is expected to close in the third quarter of 2006.

Level 3’s M&A dealings may not be over. With the TelCove acquisition, the company also acquired over 300 LMDS and 39 GHz licenses covering 90 percent of the population of the (LMDS is a fixed wireless technology that stands for Local Multipoint Distribution Services.) During a conference call to detail the transaction, Level 3 CEO Jim Crowe said Level 3 intends to take a “hard look” at the wireless spectrum, signaling it might make a decision to divest the assets down the road.

“We are pleased that we have reached this agreement with Insight and believe both Software Spectrum's and Insight's customers will benefit from the transaction,” said Charles C. Miller III, vice chairman of Level 3. “Level 3's communications business is presenting numerous investment and growth opportunities. The proceeds from the sale of Software Spectrum will increase Level 3's ability to pursue those opportunities that are more central to our communications business.”

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Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.

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