arren E. Buffett made his first move into the technology sector yesterday as he and two other investors bought $500 million of bonds issued by Level 3 Communications, the money-losing fiber optic cable company.
The deal is a watershed for Mr. Buffett, one of the most influential investors, who has avoided technology and communications investments — even when they were hot — despite occasional pleas from shareholders of his company, Berkshire Hathaway.
Mr. Buffett has said that he will not invest in areas he does not understand or where he cannot identify long-term winners. His tough investing criteria were met by Level 3, whose chairman, Walter Scott Jr., sits on Berkshire's board.
"Liquid resources and strong financial backing are scarce and valuable assets in today's telecommunications world," Mr. Buffett said in a statement. "Level 3 has both."
Shares of Level 3 jumped 51 percent on the news, rising $1.47, to $4.36. The company is looking to use the money to take customers from troubled long-distance and local phone operators, James Q. Crowe, the chief executive of Level 3, said in an interview.
"We already have a network we think goes to the right places and is constructed correctly," Mr. Crowe said. "So we're more interested in acquisitions which bring customer bases to our networks."
Under the deal, Mr. Buffett and two money managers, Longleaf Partners Funds and Legg Mason, will buy $500 million of Level 3 debt. Level 3, which is based in Broomfield, Colo., will sell the investors 10-year bonds yielding 9 percent interest that can be converted into Level 3 stock at any time if the investors choose.
Longleaf will buy $300 million of the debt, while Berkshire and Legg Mason will buy $100 million each.
The deal is a boon for Level 3, coming as the telecommunications industry unsettles investors with accounting scandals, oversupply of capacity and disappointing demand. The investment could touch off consolidation in the sector, Mr. Crowe said.
"The telecommunications industry is going through a period of unprecedented turmoil," he said. "The shakeout is creating extraordinary opportunities as telecommunications companies, their network assets and customer bases become available."
The price of Level 3's other corporate bonds jumped as much as 15 points yesterday, traders said, but the firm's debt is still rated as highly speculative, or junk, by Moody's Investors Service and Standard & Poor's.
Berkshire's Class A shares gained $800, or 1.2 percent, to $68,800. Berkshire, based in Omaha, focuses on insurance and owns 50 or so old-economy companies, holding about $29 billion in stocks and $36 billion in bonds.
