Stating the case
From Cramer - Street.com
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In response to the request in my Trading Diary for reader suggestions concerning
the fate of Loral (LOR:NYSE - news - boards) and Globalstar (GSTRF:Nasdaq -
news - boards), I got the following letter from someone who is long both names.
The writer obviously has a vested interest, but I think his note has lots of
information and a viewpoint that makes sense. Here it is:
"My suggestion is that Loral need do very little to 'bail out' Globalstar. Our CEO
has stated clearly in the last cc, that Globalstar will soon have a 'final financing'
package, which will primarily consist of backing by the Globalstar partners and
SP's Vodaphone, Qualcomm, Airtouch, DASA, the hundreds of smaller players,
and yes, a small added funding stake by Loral.
"Please realize, though, rollout is going slower than plan, the sub growth rate is
fine for this stage in the game. G* has funding through Q1 2001 already, and will
soon have through 2002 if the expected 400M or so further financing happens this
fall as indicated by CEO.
"By then (2002), G* will be profitable or so close to it that liquidity will be entirely a
nonissue. I recall your articles on Iridium. Understand, and I say this as one who
actually knows (see my email address) GLobalstar and Iridium could not be further
from each other. Whether in design, reliability, capability or even business plan!
"The 'Internet Flight Network' deal alone, can use all of Globalstar's capacity
according to the IFN CEO! Study the IFN, and you'll see it's not "pie in the sky" (no
pun intended) but a very real thing. Couple that with strong sub growth, data roll out
capability shortly, a likely DOD deal, several other vertical market deals, a
progression of the telephony roll out into G*'s best potential markets like China,
Russia, and Brazil, and it's virtually a given that this perfectly working system ...
which unlike Iridium is a system capable of high reliability, high-quality GLOBAL
wireless medium to high data (200kbs and as high as 800), telephony, positioning,
telemetry, etc., etc., etc. very shortly. The applications and potential markets are
limitless!
"Costs? Break even of 1/20 the cost (at full capacity utilization) oh what Iridium
would have had to charge at full capacity.
"Here is a list of what I expect in the months ahead:
"The case for huge increase in Globalstar share price, due to looming
developments. Here's what we are likely to see.
"Next few months:
Military/DoD contract announcement
Government agency contracts
Escalating MOU's, accelerated rate
Strong China growth
Strong Brazil growth
Strong Australia growth
Strong Canada growth
All the Iridium clients come over to G
Data and SMS / paging roll out
Russia growth and subs strong
SCADA applications, telemetry apps
Final financing round announcement this fall
Full partner backing of final financing, cash through 2002
Marketing escalation now beginning
Roll out of fixed phones (finally)
Domestic (U.S.) MOU and sub rate increasing geometric or better
Defection of current expensive/inferior InMarSat clients to G*
IFN system progress announcement
Possible Ford Wingcast telematics involvement
Defection of ORB "little LEO" clients to G
New analyst pieces giving G a good chance for success
Big maritime clients announced
Foreign govt and military deals
Commercial vertical market clients announced
Better promos on phones, minutes
Technical analysis indicators swinging strongly positive (already are)
Possible subsidized fixed/pay phone deal with foreign govt. like Mexico
Possible India SP announcement
Completion, turn on added gateways in key markets like China, Brazil, Russia
Possible buy in new partners
Wireless remote broadband apps.
Ever yet more great reports on technical excellence of system
Reversal of market sentiment, and media financial news pieces reflecting this
positive shift. We see this now with Greg Powers/PCM and his 10% recent
investment.
Understanding will sink in clearly, no bankruptcy.... ever.
"With almost 2/3 of shares short? Wow!
"So, Jim, Loral isn't going to have to 'bail out' anybody once the Street (which has
never understood G* and saw it as yet another LEO global flop like IRID) catches
on." |
