Each day, it seems, brings more bad news regarding the residential real estate market. Yesterday was no exception.

The U.S. Commerce Department reported that sales of newly built homes fell to a 12-year low in November. Such sales dropped 9 percent from October to November.

The numbers look even worse on a year-to-year basis: New-home sales were down 34 percent this November when compared to the same period one year earlier.

Sometimes I feel like a broken record, but this report offers further proof — as if anyone needed it — that residential real estate’s slump is a deep one, and one that won’t be easing anytime soon.

My advice? If you don’t want to hear any more bad news about the housing industry, don’t read the paper, don’t turn on the Television and don’t listen to the radio. That shouldn’t be too hard, right?

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Filed under: Earnings reports, Deals, Level 3 Communications (LVLT), Akamai Technologies (AKAM)

Level 3 Communications (NASDAQ: LVLT) is one of the most widely traded and widely shorted stocks of any listed on a U.S. exchange. Average daily volume in the shares is over 41 million, and shares sold short as of mid-December were over 167 million. That’s tops of all companies listed on the Nasdaq.

Level 3 would appear to be in a good business. It has 50,000 miles of IP backbone to transport voice, data, and video. It provides services to the country’s largest cable and telecom companies.

Level 3 has taken a beating in 2007 falling form $6.80 to just above $3. Wall Street has to wonder how it gets back toward $7.

For starters, the company has to cease making an acquisition a month. The company’s Level 3’s latest 10-Q lists seven deals. It isn’t unfair for Wall Street to be concerned about the pace of these buys, especially since Level 3 does not make money. In the September quarter, the company had an operating loss of $53 million on revenue of $1.061 billion. Level 3 also made $138 million in interest payments on its $6.8 billion in long-term debt.

The company has one big asset it could sell and that may have some real value. It has a content delivery business not unlike that of Akamai (NASDAQ: AKAM). In the last quarter, it brought in about 10% of the company’s revenue. A sale of the unit could be used to reduce debt. The value of the business has a much higher multiple than Level 3 itself. LVLT has a sales to market cap ratio of .6x. Akamai’s is 20x. Even with an adjustment for Level 3’s debt, that is a very massive difference. Even at 10x multiple of revenue, the content delivery operation could be worth $1 billion.

Level 3 is going to have to show investors that its M&A days are behind it and that it is willing to focus on the business of charging for use of its broadband “pipe.” Being in other lines of work only hurts the shares.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Earnings reports, Deals, Competitive strategy, Intel (INTC), Advanced Micro Dev (AMD)

Advanced Micro Devices (NYSE: AMD) comes to the end of year at a 52-week low of $7.62. Very few stocks have done as badly over the last couple of years. In February 2006, the shares traded above $42.

When the company was doing well, it was taking market share in the server and PC industries by producing better chips than more massive rival Intel (NASDAQ: INTC). In some of these segments, the company had about 25% of the market and stated it could get to 40%. Intel fought back. It pushed its R&D to produce superior products and cut what it charged for chips, which hurt AMD’s gross margins and drove the company to a loss.

AMD made matters worse by purchasing graphics chip company ATI. That loaded AMD’s balance sheet with debt, just as its operating income fell apart.

AMD could do a few things to improve its position.

The chip company says it will have an operating profit by the end of next year. But, it keeps releasing its products late, and they’re often underpowered. The firm’s new Barcelona chip has been a disappointment. AMD might be better off giving conservative release dates and product information and then doing superior than forecasts.

Another part of AMD that troubles Wall Street is its debt, which is over $5 billion. As painful as it might be, AMD should sell ATI. The company’s operations brought in $252 million of AMD’s $1.62 billion in revenue last quarter. And, the unit had negative operating income.

The last thing AMD needs to do it let CEO Hector Ruiz go. He has been the architect of the current disaster and investors are unlikely to think he can have a hand in fixing it. After all, the company has lost well over three-quarters of its market value.

Douglas A. McIntyre is an editor at 247wallst.com.

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