Merrill Lynch & Co. Inc. downgraded McLeod USA Inc. from long-term "buy" to long-term "neutral" after the cable overbuilder reported wider second-quarter losses. McLeod reported a net loss of $131.7 million, or 24 cents a share, compared with a net loss of $125.8 million, or 24 cents a share, last year. The company also lowered its revenue and cash-flow targets for 2001 and 2002, prompting Merrill to write in its report that the CLEC "has migrated away from being a growth company." McLeod said its 2002 revenue would reach somewhere between $2.1 billion and $2.3 billion, instead of $2.6 billion. In 2001, revenue is expected to be $1.9 billion. McLeod stock was down 17 percent, or 48 cents per share, to $2.34 in early trading Aug. 2.