Hi Steve - I continue to accumulate stock at these levels. RMII has recently entered into a contract with Oracle to help consolidate their customer billing into a company wide integrated billing system.
Also, RMII has entered into an agreement with COVAD to offer "DSL" services to their customer base outside Colorado and Arizona. For users within Colorado and Arizona, RMII will be offering "DSL" services end-to-end using their own integrated network.
Management has stated that their goal is to obtain a net operating margin of over 50% for their entire customer base once consolidated into the new operating company. The recent companies purchase provide an adjustment to the sales price if these companies do not meet certain REVENUE amounts over the next operating year. Therefore, based on these purchases, management has structured a revenue growth model that if achieved will provide very good net operating earnings. If these Revenue targets are not achieved, then the purchase price agreed to can be adjusted lower to reflect the current "Revenue Run Rate",
Therefore, the goal for RMII and it's management is to see if they can complete their consolidation during the next year and realize their stated operating results. If it takes them more than a year to complete this consolidation, then RMII can not adjust the amounts paid to companies purchased during the previous 12 months.
If everything can be accomplished as management states, Q2 of 2000 should show positive EBITA. This is the first financial measure that must turn positive before we will see accelerating free flow cash flow.
The risk reward at this level is low, but the future is still foggy until Q2 of 2000.
Hope this helps.
EKS |
