David...i have a valuation model for significant holdings...when I get home later tonite I will post given perpetuity growth rate, 10 yr bond rate, and current eps and rev expectations...i run different scenarios of alot my stocks so i got numbers floating everywhere...I use free cash flow equity and to firm models
but from my recollections GEMS valuation was between $17 to $20
from my vantage point, the near term risk is the rate of revenue decline on the US paging business vs the growth of integrated networks and intl paging businesses
I will admit to you that I am nervous about the next Q (and maybe the 4 Q as well)...
RISKS:
the domestic business is over 70% (i think...not at my desk) of GEMS' revenues--so its hard to make up let alone grow if domestic business HAS NOT stabilized...Q2 numbers show that domestic business decline still negatively impact top line results...the co. also stated that they anticipate this for 1997...also the disappointment with VoiceNow...this has 2 problems...one being, maybe customers dont believe in the value of the service...second, PageNet accounted for 15% of revs and has named MOT preferred equipment provider...finally, paging providers are under severe financial constraint
Intl paging business: GEMS has done well...but recently, MOT has posted contract wins...IMO, overseas mkts plays more on brand recognition (particularly in Asia)
Integrated networks: I love these businesses...MVP is extremely valuable to all telecomm concerns (wired and wireless)...but they are not the biggest and the larger competitors have been bought by LU, NT or have merged...CNET, another great mkt area...well, I dont know how they compare (meaning product feature performance, etc) agst the other telecomm equipment makers network mgmt products...more importantly, i dont think the service providers buys this product on standalone basis
the key to GEMS is domestic paging... GEMS is highly advantaged in domestic arena..if business turns, GEMS will give the best impersonation of a rocket ship...but given domestic paging's weight on GEMS revenues, its an heavy luggage
dont get me wrong...there are alot of reasons to like GEMS long term...paging is here to stay...it is a matter of timing and when the US business will turn...
GEMS will not trade that much lower...the mkt is fresh with memory of the mistakes made this spring...but something has to happen to make GEMS go...right now I like to see the integrated networks disprove my concerns...because the domestic business will turn around sooner or later!!!...thats when you will see upward movement even better than what we experienced a few mos. back
that is why I stresss long term for GEMS |
