Keeping intrinsic NTOP value in mind.
After reading what H60 said, I did some thinking.
I still think $75 per share is just a number.
But, I realize that so is $22.
There is a major difference.
I am now thinking that a better way to look at this is to see what AT&T would get by completely owning NTOP versus by just controlling it. Some of this does not involve the current price. NTOP has intrinsic value that the irrational stock market has never been able to properly assign a value.
Let me look at why AT&T bought effective control over NTOP in the first place. As I remember, I was paying very careful attention even before that happened as to what T would get if it worked with, and bought parts of, both IDTC and NTOP. Suffice it to say, I still think they got more than their moneys worth even at $75/share if they play their cards right.
We have discussed it before but the bottom line is they need to transform AT&T into the new world despite much inertia and resistance within the company. Doing it internally would entail tremendous expense, take years and be fought tooth and nail by some within the company. Believe me. I was there.
By buying into it this way, they got something that was already an evolving standard. They managed to save time and money and make it more of a fait accompli. Regulatory issues could be temporarily avoided. They could build alliances with others such as Yahoo and AOL and MSFT.
All that is well under way despite the scarcity of solid official news. I am aware of many changes within AT&T where projects have been closed or merged with NTOP and new ones started. T is now under heavy pressure and has little time to finish parts of their plan. Some things may need to be accelerated if they are to get done.
So, I wonder if they realize they do not have the time to continue this in gradual stages. They may need to move on this within weeks or months.
What if their bankers advised them that spinning off their Consumer Long Distance business would result in a stock hardly anybody wanted to buy? It might trade at $2/share if one share was issued for every share of T. But, if they spiced it up by bundling much of what once was NTOP (and maybe included parts of Liberty Media or whatever) they might be able to make it look like a forward-looking business that would do well into the future by becoming the dominant force in future IP based telephony?
If that would make this a $10 stock, then what would it be worth to them to take NTOP private and then do what it needs? At that point, the issue would not be how many dollars per share to buy the rest. Nor would it matter as much what the current market price is at a time when tech in general and telecomm in particular is so knocked down. The issue would be how many billions to pay to get a value that may be billions higher.
So, I am leaning toward the idea that they may have to buy all shares at once and that the minimum price would be determined by what it would take to make Howard Jonas part with his shares (as held by IDTC) or even the shares held by NTOP insiders.
Clearly, Howard may insist on a floor of $75 based on the past. If needed, he could get a phone offer from someone else near that price and this would trigger his allowing AT&T to beat that price as per contract. Assuming the price was agreed to at $75 or higher, that could force the same price to be offered to everyone if the buyout also needed to be done soon.
I think this may not be unreasonable. T may need to spin off LD fairly soon, perhaps by the end of the year. They may need the NTOP buyout to happen before then. Not much time left. Further, I see evidence that negotiations between T and both IDTC and NTOP have been going on for a very long time and producing few public results. I wonder if we are getting close to that time when a rumor like the one being floated could be based on a leak of what is already happening.
If the rumor has legs, the price could indeed move. If some funds like Janus and Fidelity considered it credible and decided to buy back in, it could really fly.
I remain cautious as long as this is only a rumor based on a bulletin board. Monday is an iffy day for the market as a whole and we could continue to slide or turn around. It may be hard to judge what it means if NTOP shares move up or down. Frankly, we have seen times when a rumor moved the stock and the MM and shorts reflexively held it back and knocked it down by shorting hundreds of thousands of shares reflexively.
What I will watch for is if the companies do not issue any denials after being burned last time. I will watch the rest of the week.
Either way, I think the downside on NTOP is fairly limited and the upside is huge. |
