V'man [plus general rant included], don't let Bernie bug you by calling you a 7 minute investor. Don't forget, he thinks of decades the way we think of years and internet time races by with a month being like a year.
So while he would have a good grasp of the time value of money as measured when 10% DCF type figures made sense in investment terms in the 1970s and 1980s, he would be bamboozled by the high speed WWeb economy where vast capital moves happen faster than Major Paradigm Shift. So he's become irritated and frustrated with slow progress and scared shareholders.
Even Mr MoneyBags himself, Alan Green$pan, has lately claimed to have an idea about how The New Paradigm is working and has accepted that it is a bit more than a speculative bubble, though there is a large speculative element there too.
These days, capital flows very fast to people who show business acumen [such as Irwin Jacobs, Jerry Yang, AOL, 724 Solutions, etc] leaving the industrial-age-economy types floundering around with depleted share prices. Globalstar has started to be seen as a failing old-economy cellphone in the sky run by military/industrial complex 20th century Neanderthals. That's a big mistake!
It is not. It is sitting at the beginning of an enormous technological trajectory with all improvements such as methanol fuel cells, smaller ASICs, WWeb, less power consumption, better capacity, all giving increasing advantage to Globalstar.
In 10 years, the aerials will be small, the cellphones small, WWeb functionality fast and cheap, battery life indefinite [with methanol top-ups], minutes cheap, handsets cheap and 2 billion people will want one.
This year is the on-plan, bumbling, soft marketing roll-out. The aim was to learn from Iridium, but it seems nothing was learned. G* started with expensive minutes = the biggest mistake Iridium made and Globalstar SPs have set themselves back by copying that strategy.
Even today and even in this very thread, people are saying the phones need to be cheaper. Wrong. The minutes need to be cheaper, not the phones. The handsets are in short supply, the minutes are in vast surplus with zero marginal cost of using one.
Now, I'll just run through a very sophisticated economics lecture which will bamboozle all but the most gifted.
Handsets = cost quite a bit of money to produce and production is limited because it will take a year or two to boost production to 1 million per year. Using the Gilder idea, these items are the scarcity.
Minutes = cost zero to let somebody use one. They are all up there now, being used by ghosts in the sky while paying Globalstar zero. They are the Gilderian huge surplus.
Now, in the most complex economics paradigms, when something is in huge surplus, [minutes], the way to get people using them is to cut the price of them. When the price of minutes is cut a LOT, people gobble them up like greedy little piggies. The consumption of minutes is VERY price dependent. Cheap ones get used. Expensive ones don't.
When something is in short supply, [handsets] the way to match the demand for them to the available supply is to put the price up. That will dissuade people from buying them unless they really, really want one.
If handsets are really expensive, and minutes really cheap, then people who really, really like yakking like crazy will pay the high cellphone price and gobble billions of minutes. That will give QUALCOMM, Ericy and Telit lots of incentive to produce HEAPS of handsets since the margins on them will be huge.
When there are 5 million subscribers, and minutes available are being used up, then the price of the minutes will have to be increased to reduce the demand growth so that people don't get busy signals. That will make people less inclined to buy the handsets, so handset prices and margins will drop a bit as QUALCOMM and co cut their prices to encourage new customers and keep the money rolling in.
Yes, I know it's a vastly complex concept, but I'm hoping that the Globalstar trimode team [Q, GLP and SP] will figure it out and harmonize their prices to maximize the total money coming in. At the moment, the SPs are being extorquerationate and dog-in-the-manger, demanding absurd retail margins for minutes, charging heaps for handsets and not allowing competing terrestrial handsets to connect to the Globalstar system.
Globalstar LP can get them competing by giving price cuts if the SPs slash their prices.
Yes, I know you know this stuff, but for some readers it will be new.
So, to give an executive summary [executives can't read paragraphs - they lose attention on even a long sentence].
Very cheap minutes = Good [undercut the terrestrial minutes to REALLY sell some minutes]
Expensive handsets = Good [or include the handset price in the minute price or a monthly charge since some people prefer that]
I reckon that Globalstar should exceed QUALCOMM's market cap in a decade or less. G* is a worldwide, fully-compatible cellphone system with a fast and advantageous technological pathway to Constellations 2,3 and 4. That silly little Mannesmann business was worth nearly $200bn. G* covers the whole world, not just parts of Europe with Swiss Cheese holes. What is a global cellphone system worth? Especially one which nobody else can copy; yes, Globalstar has an exclusive supply deal from QUALCOMM. ICO has to use icky TDMA technology with a technological blind alley.
In 10 years, QUALCOMM should be a $2tn company, worth MSFT, Intel and IBM combined. If Globalstar is worth that much, then it will be a 150 bagger from now. If we do a DCF type thingy, then that's a pretty decent rate of return, even if it doesn't kick in until some time next year.
You wouldn't want to miss out on this one! Now is the hour.
But you know, maybe I'm wrong and Globalstar SPs and LP are right. Maybe there really IS demand at $1.50 a minute sufficient to use all the handsets that can be produced. If that's the case, then this is going to be simply the craziest money machine in human history. It will make QUALCOMM 1999 look like a test run. You know, this is Irwin Jacobs' baby too! I saw him get a standing ovation from thousands of people and it wasn't because QUALCOMM produces things which don't work. Don't be distracted by the handset division, infrastructure division and NextWave. Those were essential to ensure acceptance. Once success was established, it was time to move out of those businesses.
Of course, you could just say I'm talking my book!
Maurice
PS: I couldn't find many AirTouch shops which knew anything about Globalstar or had handsets available. But they've been on training courses [which didn't tell them a great deal]. So marketing USA is only just starting. Same most places. With few GSM phones and the CDMA market gateways not ready, it's not surprising there are few handsets sold so far [SI members notwithstanding].
It sure seems that a lot of shareholders are not so enamored by the 'slow, soft, rollout with no customer complaints'. It seems people are starting to think a bit of action would be more fun. |
