Somebody has got to step up to the plate and reaffirm the reason we have all invested in this stock. There is too much panic, despair, and shrinkage to our collective net worth to sit by silently as we are assaulted by the market and the flow of bad news coming from our investment. So here goes; THE BULL ARGUMENT:
Any Bull argument for PSIX has to begin with its crown jewel: WEB HOSTING: For P6 web hosting was a shining bright spot in Q3 eclipsed by the nuclear explosion of Xpedior and Consulting.
Here are the numbers: 3Q00 Web hosting revenue came in at $38 million, versus $31 million in 2Q00, posting 24% Q/Q growth. Average annual new contract value for U.S. managed Web service accounts during the quarter was $354,000 (This is about $50,000 greater than the industry average.), an increase of 46% over 2Q00. Currently the company has 10 data centers with 700,000 square feet of hosting center space, bringing on roughly 350,000 square feet of space in the quarter. PSINet still plans to have 14 data centers and 1,000,000 square feet of hosting space by YE00. Keep in mind that the $354,000 contracts, mentioned above. are based on monthly recurring revenue and do not include onetime fees from professional services, consulting, or installation. We are talking about a solid year to year revenue stream.
The Great Land Grab! Get it while you can!
Forester Research forecasts the Web-hosting market at $20 Billion in 2004 and Gartner Data Quest forecasts a $24 Billion market. To corner that market a company needs a running start now, because once clients are signed up to a hosting company, they are unlikely to defect. Currently, the client churn rate in the industry is just 2%, and the reason for this low turnover is that no company wants to fuck with the smooth running of its data storage, communication, and transfer base which is housed and managed in a hosting center by highly skilled, trained IT technicians.
The bottom line is that by 2004, new competition to the hosting business will probably be shut out because its hard time pry customers away from competition, and by 2004 the land grab will be fairly complete. Players wanting a stake in the Web Hosting business need to act NOW.
The leaders in the industry are Exodus which acquired global center.. DIGX, which is backed by WCOM, and VRIO which is backed by NTT.
EXDS trades at 22.6 x revenues and has a debt to equity ratio of 2.51.
DIGX trades at 18.52 x revs. and has d/e of .03.
PSIX trades at .43 x revs of its total business with a d/e ratio of 1.99.
PSIX trades at just 3.8 its Web Hosting Revenues alone excluding other services. Mind you this revenue saw 300% growth YOY. Furthermore, remember hosting Centers will go EBITDA positive approximately 15 months after completion.
PSIX is undervalued, no question about it.
Any well financed player behind in the game is better off swallowing PSIX in FEB / MARCH. By doing so, they immediately enter the ring to become a market leader for Web Hosting and stand a chance to be the CISCO / INTEL / ORCL of web hosting, that is, a market leader with positive cash flow. PSIX offers any acquirer a postitive international HEAD START and a solid, in-place, pre-developed business plan to rollout a formidable web hosting business. This is unquestionably worth, in my mind, $15-$22 a share, minimum.
As for the future, it is OUTSOURCING. Even Oracle, the data giant, outsources its web hosting and management (to EXDS). As noted in Motley Fool, "Companies, big and small, do not have the personnel expertise or physical space required to serve their own growing data needs. Data storage devices and Internet servers require a level of attention that not even a technology behemoth like Oracle takes care of in-house.
Conclusion: IRRATIONAL Pessism rules the day. |
