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Technology Stocks : Global Crossing - GX (formerly GBLX)
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To: Ally who wrote (13110)8/3/2001 11:09:18 AM
From: paul feldman   of 15615
 
Lex: Global Crossing
Published: August 2 2001 20:02GMT | Last Updated: August 2 2001 20:04GMT


Global Crossing is suffering from the poor economic environment and from the worse problems of the telecommunications and technology sectors. But it is holding up well against telecom and broadband peers, while reducing second half guidance - and declining to comment on 2002 - is par for the course. The market's reaction looks harsh.

The disappointment in the second-quarter results was the lower than expected share of recurring revenues from telecoms services, and the greater share of low growth/low margin wholesale capacity sales. The proportion of data revenues - expected to drive growth - was also less than expected. Global's revenue mix is hard to predict. Together with the grim industry outlook, this creates uncertainty over its growth prospects. Longer term, pricing pressures hang over the whole industry.

Greater uncertainty surrounding revenues, off a lower base, means that liquidity concerns again rear their head. But Global's liquidity position looks relatively comfortable, certainly more so than its peers. Some competitors have already gone bust. Global looks well positioned, with its world network built, capital spending peaking, $2bn of cash plus its bank facility. Global now trades on about 2 times 2001 revenues, at a discount to the sector average of 2½ times, according to Deutsche Bank. Level 3 (in the middle of changing its business plan) and TyCom (which does not have a network) both trade at a premium. Global Crossing looks less exposed - though the sector is probably worth avoiding altogether.


from the london financial times
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