WSTL is a buy-
by: zone_boundry (M/111 Surface Road, Tetrahedra) 05/25/01 09:36 am EDT
Msg: 33976 of 33996
From the Yahoo boards
The telecom equipment market right now is dead. The fact that WSTL isn't selling is not their fault- it is industry wide. The key is can they make it through the lean time.
They have several points in their favor- as the captain has pointed out.
1) They sell to ILEC's not CLEC's
2) SBC has stopped buying, probably because they will only look at price in this environment. I agree, they will come back to WSTL once they resume thier normal build out of thier network.
3) The have products aimed at the CO again or the remote CO and not just CPE. That is where the margins can grow.
4) Their price reflects only DSL. TAP and Conference Plus had rev's double CPE in the last Q.
5) Most service providers are saying they will buy again in the fall. WSTL needs enough cash to survive until then.
6) They have $10 MM in credit still available. (Per CC) That and the placement should get them through to the fall. They have to complete the placement.
The market bottomed in March or April. The market is forcasting a recovery in the fall (6-9 months ahead) The time to buy is now, just before the financing is complete. When that happens the big risk is gone and the stock can approach fair values ~2x sales or $10-15.
That doesn't even factor in possible buyouts. Look at CMTN. It is in play....
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I agree with a lot of the above post, but I still like the idea of WSTL forming an alliance, with another company. One possibility would be to structure an agreement with a co. that anticipates buying a lot of their product, in the future. WSTL could structure an agreement where they forgo a certain amount of future profit per unit, in return for a signed commitment of that future sale.
The idea would be that a bank would extend a line of credit to WSTL, based on the signed commitment. Hopefully the size of the order, would make up for some of the loss of profit per unit.
Since the demand this WSTL customer would be meeting, is not predictable at this time, the large sale commitment may have to be phased in, depending on how the mkt demand plays out. And like wise in fairness to WSTL, the customer will have to allow for WSTL to adjust up their costs, if the sale gets staged out over an extended period.
With WSTL's announced efforts to improve to manufacturing productivity, such flexibly structured large win win sales agreements, could turn out to be the basis of a future model, that in the end, generates greater profits for WSTL, because of a sizable enough increase in unit volume, and improving efficiencies in manufacturing, productivity.
I am just braining storming in here, with the hope that others with in-depth business knowledge will weigh in.
Who knows a strategy like this may already be in place.
I hesitate to publish these thoughts, because the message boards have become so adversarial, that there seems to be no tolerance for taking the time to explore possible solutions. Brain storming is a process to answers, not the answer on the first go around.
Since investors don't have access to a lot of co. info., I find it a worth while exercise to try to consider what one would do, if they were in the position of making decisions at WSTL. I find this exercise helps one to key in on co. info. with greater perspective. By putting yourself in the position of management, you develop a sense for where things should lead, and when new bits of info. coming from the co. end up being what you were expecting, your confidence that you are in sync with the situation, grows to the point that you develop an investment edge.
Many companies are using this time to rebuild themselves, to me its not so much about the numbers right now, but the future possibilities and whether or not xyz co. is well positioned to participate when business comes back.
Personally I am much more interested in the optical build out over the long term,than DSL. However over the shorter term DSL is what will be available for many.
I think the demand is there from the customer end and the fact that the providers haven't gotten it to many still, is creating a negative backlash.
Providers have to know this, and if they want to capture customers for the long term and steer them towards bundled one stop packages, which the more broad band feeds can handle, the time is now.
With the pay off for providers so big, why would you mess with inferior equipment, that could further frustrate new customers, after you finally got DSL service to them years after it started being rolled out.
Lets take Verizon as an example, they turned off numerous customers in their first go around with rolling out DSL by giving people inferior access. There is too much money at stake for Verizon not to get their act together this time around. They would be foolish not to continue to use a quality dependable product like WSTL's. Through a type of alliance with WSTL, they could throw them their future modem business. WSTL could take that to the bank, and be gearing up their manufacturing end up for the coming demand, during this downtime. Kind of like they are doing now, according to the conference call. |
