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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Uncle Frank who started this subject8/5/2000 11:19:09 PM
From: John Stichnoth  Read Replies (2) of 54805
 
Re: Globalstar (GSTRF) Quarterly results were awful.

Back in January or so, we discussed here the prospects for G*. I believe the consensus at that time was that G* was pre-tornado, and we'd have to wait for the release of some numbers. The first numbers have now been released, and--to put it mildly--they stunk up the place.

The key number is MOU's, Minutes of Use. For 2Q, MOU's used totaled 1.1 MM.

People over on the G* thread have put forth several numbers they thought would be needed in order to predict success. Management has described itself as in the middle of a "slow rollout". Many countries are still not live. Others are still getting everything in place. Additionally, some anticipated services are still not in place. With these factors in mind, my estimate of "mimnimum acceptable" minutes came in at 4.4 MM to 7.5 MM. Clearly, management has failed to deliver anything close to this.

Central to G*'s problem is that they have so much debt service to cover. As the projected delay in reaching breakeven extends further into the future, it becomes harder and harder--as the debt load will continue to grow. Added cash, which will be required to carry the company through 2001 and beyond, will at best result in huge dilution to common shareholders. More likely, we are looking at eventual bankruptcy.

The numbers reported should probably close the door on G*--in its present incarnation--as a Gorilla Candidate.
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