From "Readware" in the Loral stream. Copied here for convenience.
Plenty on Globalstar in here towards the end. As copied. Not all relevant but left in for the complete picture. Judge for yourself. Crazy idea - energy from space to earth. If you want sun, just head on out to Death Valley.
To: Mr. Adrenaline (1157 )
From: Geoff Oct 6 1997 12:17AM EST
Reply #1158 of 1158
Readware's comments from this week. Very good insight, as usual....
Subject: Re: Why the action?
Date: Thu, Oct 2, 1997 10:10 PM
From: Readware
Message-id: <19971002221000.SAA29497@ladder01.news.aol.com>
The answer to your question is quite simple: for those of us in the satellite industry, all that is happening is the conversion of cold war technologies to peace time uses. The internet is the prior example of how companies can prosper and grow. Can we predict with accuracy four years (2002) out? Every satellite company makes a three horizon its business plan. In three years LOR will be above $65/share. It is not hard for me to say that, because I know the business that it will do. I see the business that many satellite companies are planning, and at this firm we do know the demand for their services since we are consulted frequently about various satellite services and how they can be best used.
The difficulty that the average investor and Wall Street analyst has is that he or she is not in the satellite industry. They don't see what is going on in China, SouthEast Asia, Brazil, India, Pakistan, Riyadh etc.
So, I don't really have a Warren Buffet expertise in predicting the future for satellite companies. I see every day what is going on, and that makes it relatively easy for me to comment on the growth in satellite franchises.
I have written before, if people think Globalstar is going to be a big business, wait till Cyberstar, Skybridge, Astrolink, and Skyway get going. The demand for broadband is far deeper than satcom telephony. I know that because I discuss that demand with different companies every few weeks. Broadband markets will drawf narrowband in six years.
So, my analysis is based on business plans that I see and my knowledge of their executability and the market demand for various narrowband and broadband services.
It really does not involve "vision" or anything like that. Most people don't have the opportunity to know satellites because they are in a different line of work. If you are in it, all it takes is seeing everything that is going on and making reasonable statements about it. The fact that Wall Street analyts "eventually" come around to seeing this is fine. What they eventually come around to seeing most people in the satellite industry knew two years ago or so.
Subject: Re: Why the action?
Date: Fri, Oct 3, 1997 1:04 AM
From: Readware
Message-id: <19971003010400.VAA13414@ladder01.news.aol.com>
No-- that was how we made our forecasts. There are many consultancy studies from KPMG Marwick, Leslie Taylor Associates, and others that have come out with numbers based on actual in-field surveys from some 20 countries. Their numbers are far higher than ours.
Subject: Re: earnings??
Date: Fri, Oct 3, 1997 1:10 AM
From: Readware
Message-id: <19971003011000.VAA19591@ladder02.news.aol.com>
No-- we said LOR will be $140/share in the year 2002, not three years from now. Three years from now, in the year 2000, it will be above $65-- we believe.
LOR itself has said that in 2002 it expects to earn $4.36/share. It will be growing at a 30% growth rate at that time, and for a number of year after that. Multiply 30 by 4.36 and you get roughly $130. Our numbers are not based on what LOR alone has said. We took the number of transponders we expect it to be leasing at that time plus our G* forecasts for it, and have come up with $4.89/share for that year. Cyberstar's transponders will yield higher revenues than Skynet's-- but I won't go into all the math for that now. The main reason for the higher cash flow is because of the data that Cyberstar will be delivering in contrast to Skynet's, which is primarily Television.
Subject: Re: CD RADIO
Date: Fri, Oct 3, 1997 1:14 AM
From: Readware
Message-id: <19971003011401.VAA14255@ladder01.news.aol.com>
Loral received $25 million worth of CDRD stock at a price of $14 for allowing CDRD more time to pay for a Loral built satellite.
As for CDRD, the pitch here is to get advertising revenues for its product (Digital Satellite Radio). It right now is expected to serve all 50 states by 1999, and be optional in GM cars that year. I do not think anyone will have a good number for you on CDRD until the advertising revenue picture comes into focus. April 1998 will be the
time for that.
Subject: Re: readware
Date: Fri, Oct 3, 1997 1:11 PM
From: Readware
Message-id: <19971003131100.JAA22644@ladder02.news.aol.com>
C* is not going to be an IPO-- it already exists as an entity of Loral. It starts Ku Band transmission in April 1998, is sold out on them, is building four more GEOs for Ka Band by 1999, and from all indications it will be sold out on all its transponders there. It should hit one billion in revenues by 2002 if the indications of a sell-out on its Ka transponders is accurate. And there is every reason to believe that it is.
Subject: Re: MIT's Technology review
Date: Fri, Oct 3, 1997 11:34 PM
From: Readware
Message-id: <19971003233401.TAA29762@ladder02.news.aol.com>
I read Dr. Hoffert's article in the MIT Review. Someone on the post here asked my opinion on it. I gave testimony in 1978 before the House Energy Subcommittee on precisely the issue that the article addresses. In fact, it was from a paper I had been asked to prepare. And this is true. I was not, by any means, the only one to testify on satellite solar power initiatives in the late 1970s. Geostationary satellites were entering a new phases, the Third Generation. Satellite solar power was a very much discussed topic that year given the energy crisis the US was experiencing. It has been discussed as recently at the June meeting of the ITU. Of course, when it comes to initiatives no one, thankfully, pays too much attention to the ITU. Most of its staffing is bureacratic, and somewhat unaware of satellite creativities.
In any event, pardoning that personal opinion of the ITU-- notwithstanding the insuperable thrust/projectile imponderables that solar power generation from satcom LEOs for the earth's atmosphere would cause (difficulties that I think are insuperable, by the way), it is the position of the US government that the marketplace must decide the energy technologies that will be employed. The US government will not fund energy projects without a clear signal
from the marketplace that such projects will bear taxable revenues. There is no satellite franchise willing to take on this solar power initiative, even if the aerophysics of thrust on a satcom were resolved (and I don't think they can be). That is, the marketplace
has made the determination that satcoms are not to be used this way. Accordingly, the US government will not interfere-- Congress is not receptive to this idea.
Perhaps, at some time in the future, satellites will be deployed for energy assistance for the earth. One,however, never knows if the Princeton Tokamak, and its iniitatives on fusion energy by that time may have succeeded and thereby obviate the need for consideration of satellites/solar power generation. I can tell you that in Kiev a project similar to the Tokamak is also feverishly being pursued.
Satcoms will not be used for energy purposes, however. Satellites are wonderful instruments for people, but they cannot do everything. And most assuredyly satcoms cannot do what Dr. Hoffert asks of them.
Subject: Re: Estimates vs. estimates
Date: Sat, Oct 4, 1997 7:51 PM
From: Readware
Message-id: <19971004195101.PAA29925@ladder01.news.aol.com>
To answer your question on what I know of Wall Street firms and LOR: the Morgan Stanley brokerage believes LOR should be trading around $31/share today, 3 October 1997. The analyst is Pierre Chao, who uses a discount to present value model. He states that LOR should be trading above $100 in 2002. You only need ask for his September 1997 report from the Morgan Stanley company, which is in New York City. I am not in New York. He calls the Globalstar launch the "defining moment" for LOR, and appears to think that will tell the LOR
story.
I also know that a company called Jannie Montgomergy Scott in Philadelphia has a technical analyst named Eugene Peroni, who has placed a year-end $25/share value on LOR. Lazard Freres Investment Bank has placed a $24/share value on LOR by year's end. An investment company named Awad and Associates stated in August on the CNBC program that Loral at $18/share was trading at 14 times 1999 earnings (I believe that is a bit high-- he may be thinking G* will be earning more than $760 million in 1999, or maybe he has put a higher number on Cyberstar for that year). I have a transcript of his comments). I have been told that the owner of the firm is a very sharp mind.
Then there is the statement from Axiom partners in New York City, which recommended LOR with a 1998 year end price of $34 (that is close to our estimaes). Also, Saul Pannel of Hartford Capital recommended the stock two weeks ago.
Other firms that follow LOR are Unterberg company in New York, Lehman Brothers Holding in New York. Oppenheimer Brokerage has a "at least $55/share" price on LOR by 2000-- that is the company where Lior Bregman works, the analyst of LOR. He has a good grasp of satellite communications. Also, BZW has the SATIN index, but there analyses are somewhat thin. Also, a firm called Credit Suisse has a Wall Street analyst named Demisch. He covers satellite companies, but with apparently an aerospace, rather than telecommunications, bent.
Then there is First Chicago, which I believe does not have a clue as to what Loral is about. His analysis leaves galaxies to be desired.
The largest money manager shareholder of LOR is Capital Guardian out here in Los Angeles, which has a very good long-term buy and hold strategy on its holdings. Quietly increasing its position are foreign money managers, I have noticed, especially from those areas where satellite growth is expected to boom.
Subject: Re: Estimates, G* Second Generation
Date: Sun, Oct 5, 1997 2:11 PM
From: Readware
Message-id: <19971005141101.KAA05244@ladder02.news.aol.com>
I have in the past, if you recall, posted webpages here for the Ovum, Leslie Taylor Associates, and Ingly studies on expected numbers for Globalstar users. Ovum predicts 8 million users by 2002 for Iridium and G*, with a spill overflow to subsidiary systems. Taylor is at 10 million (divide by 3), and Ingly is close to 12 million. KPMG Marwick is at apparently 3 million for G* in 2002. I do not know this as fact, but they did do the Globalstar study, among other consultancies, before Globalstar emerged from Loral Qualcomm (the old name for Globalstar). Frost-Sullivan has not posted numbers so far as I know, but in the September issue of GEOTELEPHONY they have stated the demand is extraordinary.
I have in the past stated, however, that it is the survey of resellers who will have the final say in satcom telephony demand. We will know sometime in March of 1998 how strong satcom telephony demand is because that is when iridium commences operations. Its President, Edward V. Statiano, has confirmed the statements of Globalstar that there is not enough system for the global demand. Note that both
Iridium and Globalstar last week petitioned the FCC for a second generation system in 2002. This is a major move indicating that what I
have said all along is now being borne out-- there is not enough satcom system for the telephony data demand that is now becoming clearer to all satcom industry observers.
Globalstar will be short of capacity in 2002, and I suspect that it will also be short of capacity in 2006. Note, that originally Hyundai and G* were supposed to start working on a second generation for implemetation in 2006. Now Globalstar has stated that it will be in 2002.
This second generation system, which will exist in concert with Cyberstar GEOs and Skybridge LEOs, assures Loral shareholders that Loral will be a pre-eminent seamless constellation power for communications services globally in the year 2002. By the year
2002, from my numbers, Loral will have operational, in concert with Skybridge, 10 GEOs and between 100-110 LEOs. The GEOs, by my calculations, will hold over 480 transponders-- and this excludes the
Mexico auction situation. In 2002, Motorola Celestri will be the competing power. Subsequent systems such as Teledesic will not be fully functional till 2003-2004.
Subject: Re: Estimates vs. estimates
Date: Sun, Oct 5, 1997 3:32 PM
From: Readware
Message-id: <19971005153201.LAA10311@ladder02.news.aol.com>
You are correct-- decoding efficiencies (bringing decoding costs down) is the most important program for satellite data transmission in a satellite company's goal to be maximally profiotable. Information Theory asserts, as you probably know, that there is a rigorous upperbound to throughput in any digital communications system. You
always assume addictive Gaussian white noise channel in the formula. Engineers of CDMA are trying to eliminate that upperbound. As decoding efficiencies improve and more bandwidth is achieved, costs per byte of data transmission will decline. You want them to move in tandem. They have declined dramatically over the past seven years already. The
standard argument begun in favor of "infinite bandwidth" is found in Viterbi's Principles of Digital Communication. He is now at Qualcomm.
Decoding efficiencies are achieved by DSP, and this has advanced that price reductions of transmitting bytes. But I don't think DSP increases carrier power. That is a function more directly of bandwidth improvements, not error reduction. |
