Quite true re margins... LVLT CEO Crowe has built into his 'model' a continually decreasing revenue per bit. The question is whether overall revenues can grow fast enough to get to cash-flow positive, so a company like theirs (which a company like JNPR is joined at the hip with, truth be told, since LVLT is the only player currently fully committed to an all-IP network for both voice and data) can 'handle' their debt. Other carriers are flushing through BK ... LVLT still hopes to thread the eye of the needle ... I have my doubts, but they have more than a year before they run into issues regarding the covenants on their loans and are sitting on a hoard of cash and semi-liquid assets that may be worth $1.5B vs total debt of $5.2B plus $1.125B revolver drawn down (the one with the covenant issues, which they dodged by 'buying' almost $1B per year of revs which have really little profit, LOL) ... so I think their scenario is that the economy recovers, their stock recovers, and they double the shares to raise cash to handle the debt ... dilution rather than destruction of equity.
JNPR needs to get 'metro' exposure in the same way that LVLT does. JMHO on that.
As an engineer, as I study the tech I agree that both 'did it right.' The only problem is, the only thing that matters is sales and profits... at least, in this 'new' post-bubble economy.
Will the rest of the world's investment in IP netowrks the next year or two 'save' JNPR's revs? I don't think so. Europe's economy has been about 2 Qs behind ours in terms of slowdown. And China is ... ahem... mostly PR. So JNPR non-US PR notwithstanding, I would not be surprised to see JNPR have zero or negative EPS for the next 2-3 Qs or more. Don't misunderstand me, since JNPR has CASH and is spending on R+D to push into other areas, they will remain a 'player' for some time. Inroads into the ILECs would help, though, and those bellheads are more worried about making the legacy circuits work first... so tho you and I may think it a waste of capital, it would not surprise me to see the bells continue to deploy mostly ATM for some years to come. sigh. |
