For convenience I'm posting a good summation of the current issues regarding PSIX (thanks to Pechorin/smithbaltimore for his expertise and balanced views:
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Yahoo is filled with a wave of idiots trying to divine the day-to-day movements of the stockprice, as if the stock price provides any indicator of PSIX's propspects and operations.
A poll of these numnuts would reveal the inabiltiy to distinguish between Vic Grover and Jeff Moran or the relation between CAPEX and the cash burn rate.
Recently there have been few intelligent threads to follow; in fact there are few substantive threads at all save for the he-said / she-said debate over short term price movement.
To me the hot topic of any PSINET Board should be "Where is the intenet industry going and is PSINET well positioned?" This two pronged question carries ALL the ANSWERS.
1. What is the future of BANDWITH
2. Will Web Hosting DEMAND reward PSIX.
3. Will the gamble on consulting pay off in the end?
4. Can PSIX restructure its cheap debt?
5. How much more telecom consolidation can we expect, and who will be left standing and why?
6. Is PSIX too underfunded and too small to compete with the big boys?
7. Which makes more sense for P6: going it alone , buyout, or strategic partnership.
8. What are PSIX's competitive advantages?
9. Is Shrader good or bad for the company.
10. Who will fill the two open board seats?
11. And of course all questions relating to the funding gap.
But today we can expect a litany of "We'll see $3 today," "PSIX headed to 75 cents," "You're an idiot," "No I'm not, you are," "shorts better cover," "I think INTC will make a bid (with no analysis or facts)," "takeout price will be $2.50." BLAH BLAH BLAH BLAH BLAH......
Right now questions 1-11 are open to wide debate and little news has come down the pipline to help investors gain confidence in the company.
As for me, I think PSINET is well postioned.
"Hi, u have a good working knowledge of the shall I say, situation. whats your opinion on BK? "
Its annoying to have the BK "possibility" bandying about, but if the sale of non core assets brings in a low end figure, the window of filing Chapter 11 gets pushed out significantly.
Notes Merril Lynch:
"We believe the most likely near-term course of action for PSI will include stretching its nearly $1B in cash at the end of September and improving its businesses. The latter includes stabilizing revenue streams, improving business processes and rationalizing its operations.
**Can Stretch Cash in '01, But Major Gap Remains Longer-term
On the cash preservation side, PSI to date has announced actions to lower total capital expenditures in '01 by $100- $200M. The company has not yet found a buyer for its 80% ownership in Xpedior (the operations were re-classified as discontinued in anticipation of a sale), nor for any of its “non-core” consulting and consumer access businesses.
We estimate PSI should not require additional investment until Q4'01, when we show a cash need of between $150- $200M. With additional cash conservation moves, we believe management should be able to stretch its cash reserves into '02. We also believe PSI should be able to achieve EBITDA breakeven by the middle of '01 if it executes well."
If ML is correct we can assume a burn rate in the neighborhood of $100M per quarter in 2001;
MINIMAL additional funding from sale of
NON CORE assets would be: $100M Inter.net; $350M TNS; $50M XPDR; $50M non-core MMWW. Sub Total =s $550M dollars. (Worst case scenario would be that only TNS finds a buyer leaving subtotal at $350M.)
Maximal sales would be: $250M Inter.net; $550M TNS; $150M XPDR; and $150 MMWW. Subtotal: $1.1 Billion dollars.
The plum of the assets is TNS, a MARKET LEADER in its field, for which PSI paid $750 Million in stock and cash in 1999. God knows what value consulting has at the moment and the sale of those assets simply may not happen for lack of any buyers at all. Inter.net has been prepped for sale though actions taken back in April of 2000; its ready to go, but are there any takers? Maybe AOL Latin America?
Burn Rate and Bankrupcy:
Absolute Worst Case: Can't sell JACK and company files Chapter 11 in Q2-Q4.
Worst Case: Sell only TNS for $350M to fund operations through 2001 and into 2002.
Decent Case: Sell TNS, Inter.net, XPDR, and MMWW components and create funding ($500M+) through 2002.
Best Case: Sale leads to over $1B in cash in which case PSINET rolls forward with only execution issues to resolve.
Till the funding gap issue is plugged, all our scorecards remain at 0. As previously stated the checklist runs as follows:
1. Funding Gap
2. Integration Execution
3. Fill two open Board Seats
4. Ramp up Hosting
5. Re energize Consluting
6. Sign up and retain clients.
So far we've got ZIPPO.
PS: Maybe PSIX gets bought out or finds Strategic Partner: the longer TNS is NOT SOLD, the more I think a strategic partner or buyout is on the horizon. If I were going to acquire PSINET, I'd want TNS, a great differentior from the competition providing ISP and Hosting.
"In the state PSIX is in right now, these assets will go for pennies on the dollar. You need experience working with failing companies. They shed everything they have to in order to survive. If they don't get a strategic alliance or reasonable offers, then the bondholders will get there share first before us common shareholders. We can keep hoping but unless someon steps forward, we are in trouble. There was a good article today In Investors Business Daily on Web Hosting growth and EXDS and AT&T, etc. were all mentioned as leaders, but no mention of PSIX."
That's because PSINET is regarded as an ISP company, not a Web Hosting Outfit. Right now Web Hosting only makes up 11% of revenues, but that will eventually change as Web Hosting becomes the core business.
"We are lost in the midst of other good companies building out at the same time."
EXDS gets great press, but they don't own their own fiber or hosting centers. They are EBITDA positive now, but their cash burn rate is about the same as PSIX, as is their cash reserve. Additionally, EXDS relies mainly on Collocation, and although the margins are good for that now, the rates for it will drop the same way access rates have. PSINET at least is positioned for high end hosting because of its consulting division, something EXDS lacks. PSIX also owns its own Fiber, and the article to which you refer stated, "Owning a high-speed communications network is of paramount value to Web hosters." PSIX has BOTH.
Furthermore PSIX consulting division goes right to the heart of the IBD edititorial point which was, "But there are risks in bringing these new customers on board. Businesses, especially small and midsize firms, are increasingly demanding more personalized service." In other words they need professional care in their outsourcing to run the servers and all the complicated accompanying software. PSIX can do it.
"I think we will sink back to .75 as the last five days have shown until we have some "real news" instead of the hype crap we see on this board."
I think you are fucking NUTS here. The drop to sub one resulting from tax loss selling, WS pessimism, and S's margin call. All three of these depressive forces have abated. The stock will rise going into earnings call; how far I can't say.
"I guess we'll just have to be patient or sell out and try to get back in lower. "
Last thought. Why would a FON, CWP, or ATT's internet division build out its own network and fill it with new customers to compete with PSIX and all the others. There is the CAPEX outlay, staffing headaches, technical hurdles, time delay, and redudency of asset buildout between competitors. It simply makes MORE SENSE to takover or partner up with an operation in FULL SWING.
PSINET is lying plump on the tree with CHEAP DEBT; trading at .33 cents on the dollar. It screams out as takeover candidate, SCREAMS. As for BK, that can be pushed out to deep 2002 or beyond by improving margins, cutting costs, filling the hosting centers and raising $250M-$750M through the sale of non strategic assets.
The fact that no news has hit the wires yet MEANS NOTHING. It can be spun both ways: 1) no takers or ; 2) lots of interest. but buyers are bogged down in negotiations over valuation and the structure of the deal.
PSINET is not in a hurry; it has time to conduct an orderly auction.
--SB |
