Leo, I'm sorry to see a denizen of this stream abandon ship for fear of further losses.
Your concerns are all valid and I've ranted about each of those, some items for years. For example, pricing, not that Jon need fear another rant on that just now. People have started to figure out that maybe demand is in some way linked to minute pricing. It is getting at least some attention now.
I'm not even sure that Vodafone has in fact signed up for a gateway in New Zealand. I don't like to say it, but I don't actually believe Mr Schwartz that that is true. I'll believe it when Vodafone announces that they have done so. That's how much credibility of Globalstar has been damaged in my mind.
But I'm careful not to let my frustration take over my thinking.
For example, I cannot understand how Globalstar can cease operation as a business, even for the present shareholders. The question is how much they'll be diluted pending profitability.
Nobody doubts in the slightest the technical merits of the system or thinks that the actual handset production cost or minute production cost [about 7c a minute] can't make a successful business. The doubt is in demand for minutes at the projected prices and the increasing financial burden as years roll by with no income. The shorts see an end to GLP as a business when the cash flow crunch hints in a few months [before the anniversary of the hard launch in November].
BUT, there is a company called QUALCOMM. That company has billions in the bank, billions rolling in and billions which they can raise in a week or so by issuing stock or borrowing. If they choose, they can buy all of GlobalstarLP and all of Loral too!
They might or might not want to do that.
But say they did, they would get control of GLP and improve their prospects of developing the business and selling millions of handsets, lots more gateways, HDR, data terminal ASICs, get heaps of royalties from Ericy and Telit and maybe Hyundai if they go into the business of handsets.
There is no way that Q! wants this effort to fail. It is just a question of what share price they act on.
Meanwhile, the short term financing can be resolved [if Q! chooses] by GLP selling Q! more stock or by way of a rights issue in the summer. I'll be a buyer, provided there is a minute-moving business plan.
Meanwhile, Vodafone and other service providers have got lots of incentive to make it work. They have to meet their business plan contractual commitments to maintain exclusivity. If they meet their contract terms, GLP succeeds as a business. If a Service Provider fails to meet those terms, GLP will sell to QUALCOMM or somebody else, the right to set up a competing gateway alongside Vodafone or whichever Service Provider fails to sell enough minutes.
Vodafone could play chicken with GLP in the hopes of buying GLP cheap, by deliberately failing to meet the terms. But if GLP outlasted them, they'd fail to gain control of GLP and also lose their business opportunity and investment to that time [in gateway provision and other costs]. So that's a silly Machiavellian plot we can ignore.
QUALCOMM is going to end up with about 20% of GLP by Xmas is my guess and maybe a lot more [though Q! seems to favour a smallish stake rather than control - which might lead to accusations of leveraging a monopoly illegally into another monopoly which would encourage Judge Jackson, Janet Reno and Joel Klein to keep their gravy-train rolling by picking on Q!].
This business will not fail.
Our job is to pick the bottom. I picked $15 but was wrong. In conjunction with a big market crash and rotten results from Globalstar, I suppose $6 is possible! But you risk missing out. Best to buy now and avoid disappointment because when this stock is $1000 in Feb 2004, you will kick yourself.
When people realize that Q! is going to provide whatever backing is necessary, and that this business will NOT fail, there could be a very ugly short squeeze. Which I'll enjoy watching as I've never seen such a phenomenon and curiosity is my middle name.
Sure, some of Bernard's style is not my ideal. I like a glasnost attitude and forthcoming information. He uses the mushroom-growing theory [keep them in the dark and feed them bullmanure].
At $8 a share, Q! can buy a going concern at the construction cost almost, with no years of design, construction, preparations, waiting, technology risk and capital rotting in the meantime. It's a supersonic bargain. Q! will be aware of the position. I think that's why the big delay on the vendor financing being forthcoming. Q! is driving a hard bargain. Fortunately, I own similar Q! stock too, so it's not costing me anything. My company A can fund my company B.
No worries,
Maurice |
