Global Software Services Provider Has Annual Revenues Exceeding $1 Billion
Acquisition Further Strengthens Level 3's Position in Information Services Industry
BROOMFIELD, Colo., May 2, 2002 - Level 3 Communications, Inc. (Nasdaq:LVLT) announced today that it has signed a definitive agreement to acquire Software Spectrum, Inc. (Nasdaq:SSPE), a global provider, marketer and reseller of business software with revenue of approximately $1.3 billion and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of $24 million for the twelve months ending January 31, 2002. The aggregate purchase price is approximately $122 million, adjusted for option proceeds and Software Spectrum's current cash position.
Under the terms of the agreement, Software Spectrum stockholders will receive $37 per share in cash and merge with a wholly owned subsidiary of Level 3 Communications. The merger is subject to approval by at least two thirds of Software Spectrum shareholders, as well as regulatory approvals and other customary closing conditions. The transaction is expected to close in the third quarter of 2002.
"Over the past few months Level 3 has moved to significantly expand its information services business," said James Q. Crowe, Level 3's chief executive officer. "We are doing so in order to take advantage of important economic and technology trends, including the continuing convergence of the broadband and software distribution industries.
"The agreement announced today is a key part of that effort. Software Spectrum is one of the nation's leading providers of software products and related services to Fortune 500 enterprises and other businesses. We believe that integrating their operations with those of our recently acquired Corporate Software subsidiary will deliver a number of short and long term benefits to our company and create value for our shareholders."
Based in Dallas, Texas, Software Spectrum sells and manages software products from Microsoft, IBM/Lotus, Symantec, Adobe Systems and other leading software publishers. The company markets to large and mid-size enterprises through sales offices and operations centers in North America, Europe and the Asia-Pacific region. The company has approximately 9,000 active customer accounts, including approximately half the Fortune 500. The company currently employs approximately 2,200 people.
"This is a significant opportunity to provide a great value to our shareholders," said Judy Odom, chairman and CEO of Software Spectrum. "We are also excited about the long-term opportunities created as a result of combining Software Spectrum and Corporate Software under the umbrella of Level 3 and its significant broadband and technology capabilities."
Crowe said that the future of IT will be heavily influenced by long term dynamics in communications. "Today, the entire structure of the IT industry is based on three inter-related trends: low cost computing, low cost storage and high cost communications," Crowe said. "As a result, enterprises are generally forced to expend capital on their own in-house computing and storage systems at the point of use. Over time, however, 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. We believe Level 3's acquisition of both Software Spectrum and Corporate Software will enable us to capitalize on this long term trend."
Paul Bazley, vice president of U.S. Enterprise and Partner Sales at Microsoft, said this transaction brings together three strategic Microsoft partners. "Level 3 has an ambitious vision for changing the future of the software distribution industry," Bazley said. "Level 3's acquisitions of both Corporate Software and Software Spectrum will help make that vision a reality."
In March 2002, Level 3 completed the acquisition of Corporate Software, a private software distribution company based in Norwood, Mass., with annual revenues exceeding $1 billion. Howard Diamond, chief executive officer of Corporate Software, said, "After closing, we will combine the strengths of both Corporate Software and Software Spectrum. The new company will have breadth and depth of capability and geographical reach that will be unique in the industry. We expect to improve the companies' run-rate EBITDA by over $10 million within a year of completing the acquisition through cost savings opportunities. We believe this merger will enhance our opportunity to grow revenue and enable us to become the global leader in improving the way companies acquire, implement and manage software, while doing so at lower costs."
Crowe said the acquisitions will also produce benefits for Level 3's (i)Structure subsidiary, which provides managed IT infrastructure services and enables businesses to outsource their IT operations. "Both Software Spectrum and Corporate Software have longstanding customer relationships with the world's leading corporations," Crowe said. "We believe (i)Structure will be able to leverage that customer base to achieve scale and grow its business going forward."
About Software Spectrum
Software Spectrum is a global business-to-business software services provider with sales locations, operations and contact centers throughout North America, Europe and Asia/Pacific. The company provides enterprise software management and contact center solutions that help organizations increase business value from information technology. For more information, visit Software Spectrum's Web site at www.softwarespectrum.com/.
About Level 3 Communications
Level 3 Communications, Inc. (NASDAQ: LVLT), an international communications company, operates one of the largest Internet backbones in the world, connecting 180 markets in 18 countries. The company serves a broad range of wholesale, enterprise and content customers with a comprehensive suite of services including: Internet Protocol (IP) services, broadband transport and infrastructure services, colocation services, voice and voice over IP services, content delivery and media distribution services. These services provide the building blocks to enable Level 3’s customers to meet their growing demands for advanced communications solutions. The company’s Web address is www.Level3.com.
"Level 3 Communications,” "Level 3," the red 3D brackets and the Level 3 Communications logo are registered service marks of Level 3 Communications, LLC in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service, product or company names recited herein may be trademarks or service marks of their respective owners.
Forward-Looking Statement
Some of the statements that we make in this press release are forward looking in nature. These statements are based on management’s current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside our control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent us from achieving our stated goals include, but are not limited to our ability to: successfully integrate acquisitions; increase the volume of traffic on our network; defend our intellectual property and proprietary rights; develop new products and services that meet customer demands and generate acceptable margins; successfully complete commercial testing of new technology and information systems to support new products and services; attract and retain qualified management and other personnel; and meet all of the terms and conditions of our debt obligations. Additional information concerning these and other important factors can be found within Level 3’s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
