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Technology Stocks : MCIP - when will it be taken over?
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To: Marc Fortier who wrote (1)1/30/2005 10:25:45 PM
From: Larry S.  Read Replies (1) of 22
 
Marc, thanks for the link. I have taken the liberty of posting Mr Chou's comments:
Our investment in MCI Worldcom (MCI) follows the same script. We don’t know with any degree of certainty how the telecommunications industry landscape will play itself out in a few years. But what we do know is that MCI has a new management team and a highly motivated group of value managers owning significant amount of MCI shares. Over the past two years, MCI has shown some ability to generate cash from operations and asset sales as it went through the bankruptcy process. Our analysis shows that at the current price of $16, it is well covered by its cash and other valuable assets including infrastructure, long-term contracts, tax loss carryforwards and real estate assets to name a few.
One part of our job in analyzing a company is to assess whether an outstanding company is priced at an outstanding price, an average company priced at an average price or a poor company priced at a poor price. One can make money in investment if you buy an outstanding company at an average price (this is our preferred choice) or an average company at a poor price.
In the case of MCI, our opinion is that we are buying a below average company at a fire sale price(Chapter 22 price) which is somewhat similar to the conclusion we had reached earlier with
Kmart. If that assessment proves to have been optimistic, we think we should get most of our money back. The company recently announced that it has identified $2.2 billion of surplus cash (roughly $7 a share) and will start returning that cash to shareholders through a quarterly tax free distribution of $0.40 per share. In a nutshell, if you are buying CRAP (cannot realize a profit), make sure you are paying no more than scrap value.
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