I have been researching ISPD for a couple weeks and although I have become convinced that ISPD represents an unbelievable opportunity in today's stock market this will be my first attempt to put it all in writing so bear with me.
First we must discuss the future of DSL technology as a whole and then I will get into why ISPD will thrive within the DSL world. Currently there are 8 different variants of DSL: ADSL, ADSL lite, HDSL HDSL2, IDSL, RADSL, SDSL, and VDSL. All of these standards qualify as broadband (defined as anything over 200 KBPS) with speeds ranging from 384 KBPS for ADSL lite to 52 MBPS for some VDSL systems. For our purposes we will talk mainly about SDSL (synchronous digital subscriber line) and its applications. While SDSL has not become the clearly preferred standard, it is becoming the most prevalent virtually all CLEC's (competitive local exchange carriers) support the SDSL standard. SDSL is the standard Interspeed's products are promoting although they can be used with over standards as well.
Let's start with the advantages of DSL over other technologies. The biggest advantage is that of cost of bandwidth. In most urban areas DSL will be the most cost effect broadband solution for both businesses and consumers. DSL offers cost advantages to the consumer, but it also has cost advantages for the phone companies and ISP's by utilizing existing twisted copper pairs. This means that the phone companies only need to buy DSL routers and switchers instead of rebuilding the entire network. This should have allowed DSL to reach the market place faster than cable modems, but it did not. One of the main things slowing down the roll out of DSL has been access to the infrastructure itself. However, on Thursday the FCC is expected to approve a bill that will force the regional phone companies to share there lines with companies interested in providing high speed internet access. Although DSL is currently behind cable modem service in deployment, DSL offers significant technical advantages over cable modem services and after the new FCC ruling DSL should easily catch up to cable modems. The main advantage of DSL over cable modem service is that of dedicated bandwidth. Cable modem users must share bandwidth with anyone logging on in their local cable loop. As a result businesses are unlikely to choose this option for mission critical data transfer. For businesses DSL wins hands down. For home use it is still up in the air, but recent reports suggest that DSL will prosper in urban areas while cable modems will be more successful in semi-rural areas.
Hopefully you are now convinced that DSL has a great future now we can discuss why Interspeed will capture a reasonable percentage of the DSL market share. Once again the analysis turns to cost. Interspeed offers the most cost-effective solution in DSL hardware. The system 1000 and system 500 are unique in that they can provide an effective solution without the need for additional equipment. In the past CLEC would buy multiple pieces of hardware often from multiple vendors to complete their DSL system. By offering everything needed to get DSL up and running in a single platform Interspeed has reduced the cost of implementing DSL and made the entire process less complicated at the same time. In the past CLEC's and MTU owners would have to mix and match to make sure all of the DSL equipment was interoperable with equipment from other vendors (they would end up with multiple vendors because different vendors had different price and performance advantages for different pieces of equipment), now Interspeed is offering the most cost effective complete solution and reducing install complexities at the same time.
In short ISPD is poised to have tremendous revenue growth in the near future. The question is not if ISPD will get contracts for their equipment, the real question is whether they will be able to keep up on the manufacturing end. However, by the time they might experience bottlenecks revenue will have grown by such a huge percentage that the stock should trade at or above $40 (or about a 500 million market cap). If the manufacturing capacity can keep up the sky is the limit for this stock.
More analysis later. |
