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Technology Stocks : LAST MILE TECHNOLOGIES - Let's Discuss Them Here
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To: MikeM54321 who wrote (6017)11/18/1999 1:11:00 PM
From: Mark Madden  Read Replies (1) of 12823
 
Mike,

I have enjoyed Frank and your comments on the engineering/construction sector. They have stimulated new thoughts that I still have not brought to conclusion.

IMO the shortcomings of the engineering/construction industry is main reason we do not have broadband communications everywhere today. The Qwests, Level Threes, etc. have used massive construction projects to do the easy and non risk part of building the backbone. It is the last mile that requires non standard solutions through non typical urban areas at the risk of building the wrong section first. Cable modems and DSL systems increase bandwidth the the home, but I consider them interim solutions until we get fiber closer to the home. Surely the need for more bandwidth is not topping off. The construction industry is the answer to the infrastructure needed for future bandwidth needs.

The engineering/construction industry is different than equipment manufacturing or communication operations. Equipment manufacturing requires years of scientific research protected by patents, industrial secrets and relationships with other large manufacturers and customers. Once a product is designed, manufacturing will produce high margins if the quantities are high and the competition is limited. Communications operations will also high margined if the capital or infrastructure costs are high enough to limit competition. They continually increase margins by reducing the cost of delivery and selling more features. I can not imagine the engineering/construction industry ever being high margined.

A successful engineering engineering/construction will have many projects all over the nation or world. Knowledge will be wider than it is deep. If margins become high enough, some crews will branch off and start their own companies. Competition will become prevalent. They need special expertise or equipment limiting competition to become high margined or they need to operate low margined and rely on expansion to improve profits.

Many highly successful companies are low margined. There is nothing high tech or unique about a hamburger but McDonalds has been successful. Costco is going though huge growth on a low margined business. A good reputation and dependable service will go a long way to help expansion while low margins limit competition.

IMHO last mile engineering/construction industry will be at full speed for many years. Many of the companies in the industry try to add special expertise and service to get an edge on competition. They should be quite successful.

Am I on the right track?

Regards,
Mark

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