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So, Lumen Technologies just announced they've passed 1,000 customers on their shiny new Network-as-a-Service (NaaS) platform. The press release, dripping with the kind of corporate optimism that only a marketing department can produce, calls it a "major milestone." They're talking about "unleashing the world's digital potential" and positioning themselves as the go-to network for the "AI economy."
Give me a break.
Celebrating 1,000 customers for a company of Lumen's size is like a pro athlete celebrating that they successfully tied their shoes before a game. It's a necessary step, sure, but it ain't the main event. While they’re busy patting themselves on the back for signing up Churchill Downs and Best Buy, the rest of the company is a slow-motion train wreck of declining legacy revenue. This isn't a comeback story yet; it's a company frantically trying to build a lifeboat while its battleship sinks.
A Tale of Two Lumens
On one hand, you have the Lumen of the future. The Lumen that powers the Kentucky Derby, providing "high-capacity, secure connections online in minutes." This is the Lumen that gets a fancy partnership with the Seattle Space Needle, showing off its tech prowess. (Does Lumen Technologies' (LUMN) Space Needle Project Reveal a Competitive Edge in Digital Infrastructure?) This is the Lumen that just got recognized as the "2024 NaaS Service Provider of the Year." It’s fast, it’s agile, it’s AI-ready. It’s everything an investor wants to hear.
Then there’s the other Lumen. The one buried in the financial statements.
This is the Lumen staring down the barrel of persistent, "double-digit declines" in its old-school business lines. The Lumen whose own outlook predicts its revenue will continue to fall every year until 2028. Let me repeat that: their grand plan involves making less money for the next four years. They project earnings will somehow swing from a $1.2 billion loss to a $1.5 billion profit in that time, but how does that math work when your top line is shrinking? Are they planning on discovering a money tree in one of their data centers?
Lumen is like a homeowner who decides the best way to fix a crumbling foundation is to install a gorgeous, state-of-the-art Italian marble kitchen. The NaaS platform is that kitchen. It’s sleek, it’s impressive, and everyone who sees it oohs and aahs. But while they're showing off the new smart fridge and self-cleaning oven, the cracks in the basement walls are getting wider. The new kitchen does absolutely nothing to stop the house from collapsing.
So they got 1,000 customers. That's a good start. No, 'good' is what your mom says about your art project—this is just a single data point in a hurricane of red ink. How much revenue do these 1,000 customers actually represent? Is it enough to plug the massive hole being blown in the company's hull by the dying legacy services? The press release offcourse doesn't say.
The Debt Shell Game and the AI Pipe Dream
Every week I get another press release from some company I've never heard of, claiming they're now "powering the AI revolution." It's the new "on the blockchain." It's meaningless. Lumen is screaming from the rooftops that it's building the fiber backbone for our new AI overlords, and this NaaS platform is the key. It's a great narrative. It just might not be true.
While the NaaS story gets the headlines, the real action is happening in the backrooms with the bankers. They recently repriced $2.4 billion in debt and raised another $425 million in notes. (Latham Represents Lumen Technologies on US$2.4 Billion Term Loan Repricing and US$425 Million First Lien Notes Offering) The result? They're saving about $34 million a year in interest payments. That’s not innovation; that’s financial engineering. It’s a smart move, don't get me wrong. It buys them time. But time for what? To convince more people to buy into the NaaS dream before the legacy business bleeds out entirely?
They're extending fiber, targeting "recurring enterprise contracts," and trying to pivot the entire company. It’s a monumental task. They're trying to turn a lumbering old telephone company into a nimble, cloud-native tech darling. Can it be done? Maybe. But the market seems to have its doubts. The community fair value estimates for the stock range from a buck thirty to over fifteen dollars. That’s not a range; that’s a chasm. It tells you that nobody—not the analysts, not the community, maybe not even Lumen itself—has any real idea what this company will be worth in a year.
They are making progress, I guess. The Space Needle, Churchill Downs... these are real, tangible wins. But are they catalysts or just distractions? Are we watching a genuine turnaround, or are we just getting a better-managed decline? They expect us to believe that a few high-profile wins and some clever refinancing can reverse this massive ship, and honestly...
Then again, maybe I'm the crazy one here. Maybe this is exactly what the beginning of a massive turnaround looks like: a few glimmers of hope amidst a sea of terrible numbers. But for now, it feels like we’re being sold a highlight reel while the rest of the game is a blowout loss.
A Fresh Coat of Paint on a Rotting House
Let's be real. Lumen is in a race against time. The NaaS platform and the AI-fiber narrative are their Hail Mary pass. It’s a good story, and they've landed some impressive customers to back it up. But the fundamental decay of their core business is a cancer that can't be cured with a press release. They're saving millions on debt interest, but they're losing billions in legacy revenue. Until that equation flips, all the "major milestones" in the world won't matter. I'm not buying the hype just yet. Call me when the foundation is fixed, not just when the kitchen looks pretty.