Level 3 Scoops Up Software Spectrum

By Susan Rush
from BroadbandWeek Direct, May 2, 2002

Level 3 Communications Inc. is adding to its information services business by purchasing Software Spectrum Inc.

The Software Spectrum buy is fueled by the convergence happening in the broadband and software distribution markets. Level 3 will integrate the software management company's operations with its recently acquired subsidiary Corporate Software. "Over time, improvements in communications technology will continue to drive down the price of moving information and allow businesses to buy software functionality and data storage as a commercial service accessed remotely over broadband networks," Level 3 CEO James Crowe said in a statement. "We believe Level 3's acquisition of both Software Spectrum and Corporate Software will enable us to capitalize on this long-term trend," he said. The company completed the Corporate Software acquisition in March.

Level 3 will pay $37 a share in cash for the enterprise software management company, an 85 percent premium over the stock's 52-week high of $20. Based on the number of shares outstanding at the end of Spectrum's fiscal third quarter, the deal is valued at approximately $115.7 million.

The deal, which is expected to close in the third-quarter, is subject to approval by at least two-thirds of Software Spectrum's shareholders, federal regulators and other customary closing conditions.

News of the acquisition boosted both companies' stock prices. In early trading, Level 3 shares were up more than 7 percent to $3.85, while Software Spectrum shares skyrocketed nearly 118 percent to $36.24.