Cramer discusses I* failure
Calling All Competitors
By James J. Cramer
9/13/99 7:30 AM ET
If only we knew who would survive and who would fail among
all of these telephone providers. We could make a fortune.
But the process of divining the winners is fraught with every
conceivable difficulty.
We know that not all of these local exchanges, international
conglomerates and joint ventures are going to make it. Take
this morning's Bell Atlantic (BEL:NYSE) news with
Vodafone (VOD:NYSE ADR). (I am long Bell Atlantic.) This
one sounds like a winner. But later today we will hear MCI
WorldCom (WCOM:Nasdaq) talk, and chances are, that will
sound like a winner, too. Net2Phone (NTOP:Nasdaq)
sounds like a certain winner. That is, until Talk.com
(TALK:Nasdaq) comes out with its plans in a few weeks.
AT&T (T:NYSE), well, how could it lose? It's AT&T! But who
is going to rule out Sprint (FON:NYSE)? And can't we get
excited about the prospects of using Qwest
(QWST:Nasdaq) nationwide? Or Nextel (NXTL:Nasdaq) for
that matter? Or why not Global Crossing (GBLX:Nasdaq)?
Omnipoint (OMPT:Nasdaq) has good ads; maybe it has
something. How 'bout this Winstar (WCII:Nasdaq)?
You see my point? It is impossible to get your arms around
all of these different competitors. So what we do is we turn
to research for the matter. Ah, but that's the real rub, isn't it?
In this world, every one of these companies has a banker or
a prospective banker. The research is merely a promised
pawn in the investment banking arsenal. I know that is a
jaded way to look at it. But go back to the lesson of Iridium
(IRIQE:Nasdaq). Here was one of the greatest failures in the
history of business. This one will make the Edsel look like a
moderate success. But Wall Street research couldn't flag it,
for the same reason that Cory Johnson presents in his
terrific piece elsewhere in this morning's pages. Sure, we, as
customers, want Wall Street research to be unbiased and
free of conflicts with investment banking. But who are we?
Do we pay the bills at these places, with our low
commissions? Nah, in some ways we don't deserve better
than we get because the bills are really paid by the
underwritten companies. We can't ask an analyst who works
for an investment house that underwrote Iridium to say, "Sell,
because this is the most cockamamie thing I have ever seen
and it doesn't even work for the tarmacs of major Caribbean
airports." We don't pay these critics more than Iridium does,
so we have no right to expect better.
That's why, when we came up with the idea of
TheStreet.com, we thought one day we could be the place
where people read objective truths of companies in a forum,
a battleground of ideas. Wall Street research can't possibly
beat Virtual Main Street research. Main Street research
before the Net, though, never had a place to gather.
The only way to take out the old paradigm of
underwriter-pays-banker-who-pays-analyst is to offer an
alternative: Users report their views and you decide. That's
what we need to do here.
Right now, as we prepare the technology, we can only do
things ad hoc, as in "What phone do you like?" But one day,
I envision a thread at the end of this article where you can
rate your own experience with all sorts of long-distance
providers and give your views of what will work.
Just think if you had known that Iridium didn't work from any
of the promised places. Can you imagine how much money
you could have made with that? Imagine if you knew that one
of the providers mentioned in the second paragraph offered
low or no service, or charged too much or didn't work inside
buildings. That's the kind of stuff Wall Street research can
never reveal. It would destroy the compact taken inside
these firms: First, do no harm to clients.
I can wait to do some harm.
James J. Cramer is manager of a hedge fund and
co-founder of TheStreet.com. At time of publication, his
fund was long Bell Atlantic. His fund often buys and sells
securities that are the subject of his columns, both before
and after the columns are published, and the positions that
his fund takes may change at any time. Under no
circumstances does the information in this column represent
a recommendation to buy or sell stocks. Cramer's writings
provide insights into the dynamics of money management
and are not a solicitation for transactions. While he cannot
provide investment advice or recommendations, he invites
you to comment on his column at jjcletters@thestreet.com.
Send letters to the editor to letters@thestreet.com.
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