based on my understanding, the usps contract was an IDIQ contract, with no definitive quantity specified or guaranteed, and who knows if it was a multi-year committment or stnd gov't 1 or 2 year funding committments only. further, i would be willing to hazard a guess that the usps contract was a lost leader contract, at prices that have little or no margin in them. as such, i wouldn't be taking the usps contract to the bank.
further, spacenet just lost their largest domestic u.s. customer to hughes, that being their 5700 site, existing/installed contract with shell oil (now called equiva, which is the merged downstream operations of both texaco and shell. this means: (a) no renewal of the existing 5700 sites for another 5 year term, (b) no replacement of the existing 4000+ hughes sites installed at the texaco locations, and (c) the certain multi-thousand site additional new site. in addition, bp-amoco is about to announce the winner of their rfp, which is between hughes and gilat, with the winner likely walking away with all. IMO, they are at risk of losing this 1500 site customer as well. earlier this year, they lost another existing customer, ross stores. further, hughes seems to be sweeping all new awards of any significance.
if you read their prospectus, my interpretation of the way they've financed/proposed some of the current deals is to use a five year financing rate, but require the customer to only sign up for a 3 year committed term. as such, they take the risk if the customer terminates after three years. i suspect there's a significant potential liability hanging out there.
didn't spacenet lose something like $18M last year? how is gilat going to turn that around so quickly and stem that flow?
perhaps you're correct and they'll overtake hughes and the rest of the industry. they're certainly an aggressive company, willing to take what i perceive as significant risk. with risk comes opportunity, but also some significant downside.
good luck.
my vote, however, is not on this horse. |
