Opinion ID: 622296
Heading Depth: 2
Heading Rank: 5

Heading: Disclosure on October 23, 2007

Text: On October 23, 2007, the last day of the class period, defendants disclosed that while Level 3 had strong sales, its provisioning capabilities were constrained as a result of the ongoing integration efforts. During a conference call with analysts and investors, defendants announced reductions to Level 3's financial forecasts for the fourth quarter of fiscal year 2007 and for the fiscal year 2008. Crowe explained: I'll now turn to what we view are the root causes of this problem. . . . When several services in several different locations are ordered by a customer, the provisioning process can require considerable effort and expertise to accomplish effectively and at scale. Level 3 in each of the six network companies we acquired in 2006 and 2007 had the same general process but the specifics differed among the companies. For quite some time, we've had a plan to move all sales and service to one unified set of processes and systems. . . . The . . . program developed and started in 2006 and is well along. . . . A significant amount of our integration spending this year is on the . . . effort, and we expect better provisioning throughput and significantly lower unit costs as we move forward. In the interim, we plan to increase the throughput of the seven legacy sales and service activation systems, in part by developing temporary process in systems [sic] that made using those individual systems simpler, and in part by assigning more people and other resources than would be needed by a more efficient system. Id. at A78. O'Hara explained that [t]he integration is going well in all of the other areas. The really complicated stuff, though, is the service delivery and service management, those two are related because of their reliance in underlying systems. So, the physical network integration, the real estate integration, all of the people side of things are all progressing well. Id. at A81. There's a long tail in some of those items, O'Hara said. Id. On October 16, 2006, at the beginning of the class period, Level 3's stock price closed at $5.32 per share. Id. at A54. During the period, Level 3 stock traded as high as $6.75. Id. at A147. On October 22, 2007, the price was $4.32 per share. Following defendants' announcements, on October 23, Level 3 fell to $3.28 and then to $3.18 on October 24, resulting in a loss of approximately $1.76 billion in market capitalization in two days. Id. at A81.