For a small company, Level 8 Systems (LVEL) has big connections. The New York developer of messaging "middleware" has strategic alliances with both IBM and Microsoft.

Big Blue has chosen Level 8 as a "premier partner" in supporting IBM's MQSeries software. Microsoft, on the other hand, has signed an exclusive pact for Level 8 to develop gateways between Microsoft's Falcon messaging middleware and other incompatible hardware platforms, such as the MQSeries. Middleware lets computers communicate with other operating systems and server software and with different networking systems.

Level 8's stock got a big boost from the IBM and Microsoft pacts. The company, which went public in July, 1995, at 5 1/2 a share, did a secondary offering at 11 on Dec. 17, 1996. It traded as high as 17 9/16 in mid-January, but has since tumbled to 11.

Not to worry, says analyst Vivek Rao at Hampshire Securities, which took the company public. He expects a rebound soon as a result of another alliance with a computer biggie yet to be announced. The impact of the new deal hasn't been included in Rao's current earnings estimates of 12 cents for 1997 and 54 cents for 1998. Neither is it in his target of 27 for the stock. Rao figures Level 8 will produce revenues of $21.5 million in 1997 and $41.9 million next year, up from last year's $12.8 million.

Level 8 CEO Arik Kilman says the full impact of the IBM and Microsoft pacts will be more visible next year.

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