Alphanet Telecom, WOW ! Message Board

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Technology Stocks : Alphanet Telecom, WOW !

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To: RBMac who wrote (62)	11/20/1997 9:45:00 PM
From: wynn quon	Read Replies (1) of 117

Thanks for the info, I got a copy of it today! For those interested it is entitled: "Alphanet an unknown, undervalued orphan". It's written by Randall Abramson, a portfolio manager. As Dave mentioned, the article came out in May (this was when FAX was at $10.95). There's a caveat at the end of the article that said that Abramson may own some FAX shares. I found it to be mostly a repeat of what's publically available in the company literature. The one new piece of analysis is his valuation of the InnFax business at $50 million or 13x earnings. The weakest part of the article (IMO) was the assessment of Alphanet's competition. He cites as barriers to competition the accounting rate settlement system to which the established long- distance operators are committed to, Alphanet's proprietary technology, and availability of experienced telecoms management. However, technology has been changing quickly - there are now well-established standards for voice over IP (H.323) to which the industry is moving rapidly. This will make proprietary technology a bit of a handicap. As well the new IP telephony gateway servers that are coming out,will allow many companies to enter this market at fairly low cost (assuming that there will be money to be made). At the same time, it would be premature to write off the large carriers. In the US, rate settlements will be capped quite soon. It would be naive to think they would just sit back while their business got taken away. It would be quite easy for the carriers to cut their prices to limit the gains that companies like FAX would make. So competitively, FAX is not in a strong position. It could get caught between two groups: A rush of new entrants seeking to get into the market and the existing giant carriers aggressively protecting their turf. Usual disclaimers apply. By the way, I think there are profits to be had on both the short and long sides because of the high volatility of the stock. I just wouldn't want to be on the long side for the long run.

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