Lots of Readware stuff, good reading. Good to see this thread getting active again. The Fool's board is very active again as well.
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Subject: Re: readware follow up
Date: Wed, Dec 3, 1997 21:17 EST
From: Readware
Message-id: <19971204021700.VAA00778@ladder01.news.aol.com>
1. The fixed site and mobile numbers I cited (50 million and 30 million respectively) are the addressable market, not the actual market, that Loral quoted in its conference for G*. Some (e.g., the ITU) hold the mobile market alone is itself 50 million. It is not that in 2002 or 2006 that these markets will exist-- they exist now. The aim of G* is to get as much of both as its capacity allows as soon as possible. How much
they get of both markets is the question.
2. No other GEO or MEO or LEO system currently underway, outside of G*, has plans for fixed-site. One of the reasons why is that getting licenses for them is very hard. I would not be surprized to see ICO Global go after this market in three or four years, though.
3. The fixed-site portion of G* will be handled by SSL GEOs-- the 2nd generation G* LEO constellation will not be increased. I believe that number now is up to 64 LEOs. I am not at my desk now, so I can't check that number.
4. G* itself at the conference estimates $15.83/share for 2002. And that is substantially higher than our $11.85 number. I do think it is probably correct to assume that the $11.85 number is probably too low for 2002.
5. G* capacity is for 6 million first generation and, it looks, 8 million first and second (as defined now) generation. I think Mr. Schwartz would love to have the problem of how to meet a burgeoning demand. However, the addressable market is not the actual market that comes into real demand, as I pointed out above.
6. The fixed site situation came to light to us in September, as I wrote in an earlier post. I have never conceived of G* as just this "global traveller phone" company, as a system geared only towards the traveller. When G* was called Loral-Qualcomm back in 1991 or 2, and I heard of this satcom telephony system, I never believed that Loral management was not looking at being the global satellite telphony system. That involved more than some
"travelling executive"-- it meant canvassing the entire market, a market for hundreds of millions. The problem was getting the satellite constellations and their configurations figured out and in orbit and to the right markets. So the comments about fixd site they printed up in their conference papers is not that much of a surprize to me. I am surprized at the fixed site addressable market number G* cited at the conference. Fixed site numbers are
very hard to track/estimate since resellers are not the ones who handle that actual traffic. Mobile estimates are much easier (at least the estimates one makes are arguably within the province of probability), since they do. It will be interesting to see how much fixed site business comes to pass in China.
I see today, by the way, that Argentina CTI announced it is spending some $128 million, some of which is for G* assistance in the Argentine cellular system.
Subject: Re: ARGENTINA
Date: Thu, Dec 4, 1997 09:17 EST
From: Readware
Message-id: <19971204141701.JAA19038@ladder02.news.aol.com>
It is additional revenues for Globalstar-- and if we see this happen in a number of countries, it starts adding to G* revenues for services other than strictly individual telephony calls.
Subject: Re: Readware
Date: Fri, Dec 5, 1997 17:48 EST
From: Readware
Message-id: <19971205224800.RAA27874@ladder01.news.aol.com>
This is not new-- the US Government (military top brass) has been using a G* proxy constellation (for satcom telephony) developed by SSL for a number of years now. I had stated this last year some time on this post when some has wondered if the technology worked. The Qualcomm initiative that you mention might relate more to G* as a military bases satcom provider worldwide for the US military (all military personnel overseas in non-wired territories,
instead of just top-brass, as now) calling from G* phones. This would be a very good move for both companies-- it is just conjecture on my part. There has been some "rustlings" about this for a while, but I have nothing definite on this except my hypotheses here.
Subject: Re: NASA/NSF Study
Date: Fri, Dec 5, 1997 17:50 EST
From: Readware
Message-id: <19971205225000.RAA28036@ladder01.news.aol.com>
I read the report-- in fact, it is on the table over there. It says what you stated it says. Numberswise, this means a population usage of 17 million users in five years.
Subject: Re: Movement
Date: Sat, Dec 6, 1997 00:10 EST
From: Readware
Message-id: <19971206051001.AAA10660@ladder01.news.aol.com>
If it makes you feel better Toothog, Bernard Schwartz purchased another $1,000,000 worth of Globalstar stock three weeks after he purchased $1,000,000. The first purchase came a week before he announced the delay in the G* 4 December launch, the second purchase was about three weeks ago, a week or so after the launch delay was announced. You can call his office for verification, or look at SEC filings for the past six weeks. The news of the first
purchase I mentioned appeared in the Wall Street Journal in the past five weeks, but, as I said, you can check SEC filings for activity in corporate management's buy and sell of stocks in companies for which they work or which they manage.
Either the Globalstar chairman likes to throw his money around, or he is on to something. He didn't get rich throwing his money around, I think you would agree. You must remember that Wall Street money managers think minute to minute-- this is why they continue to underperform the S&P 500 average, and why mutual fund shareholders in the large do worse in investment returns than a blind purchase of an S&P 500 "basket".
The decline in Globalstar stock's price in the face of its chairman's two large purchases makes an outside observer watching Wall Street money managers wonder how these money managers got their jobs in the first place.
Subject: Re: NASA/NSF Study
Date: Sat, Dec 6, 1997 00:12 EST
From: Readware
Message-id: <19971206051200.AAA09530@ladder02.news.aol.com>
NASA Langley Research Center in Virginia, to answer your question, puts out very high quality research. A lot of consultancy studies quote them because of the excellence in their research.
In answer to nine emails to me about Loral's share price: price projections on Loral can derive two ways: on an EBITDA basis, or a net earnings basis.
On an EBITDA basis, Loral will earn $256 million in 1998, $826 million in 1999, and $1.35 billion in 2000. Revenues will grow from $2.273 billion in 1998 to sligghtly over $4 billion in 2002. These numbers are lower than Loral's numbers by some 3-5%, and assume their GEO and LEO launch schedules are within three-four weeks of estimated dates as published today. The market demand is there, and transponder leasing by Loral is moving very forcefully
ahead.
On a net basis, given that Loral management continues to expense (rather than capitalize) assets (G* and C*), 1998 looks to be a loss of some $.38-.$47/share. However, EBITDA from 1997 to 1998 looks like a double. In 1999 it appears that G* debt is going to be paid upfront in a substantial way. This is contrary to my initial projection of $.63/share in 1999. The earnings are there, but they will be reconfigured towards debt paydown. Accordingly, the
1999 net looks to come in somewhere around $.33/share (I am assuming G* will pay some $450-550 million in debt that year to its bondholders.) However, EBITDA looks like a 225% increase over 1998. And EBITDA in 2000 looks some 64% higher than 1999. Net earnings that year look to be about $1.57-$1.61/share.
I am fairly confident of these numbers (within a 5-7% range of accuracy), which, as I said, are lower than Loral's. The G* launch delay looks like up front it cost about $33 million in net earnings for 1999, but that will be recaptured in 2000-- it's a wash.
If you look at LOR on an EBITDA basis, the stock price could very well see close to $50 in 1998 early 1999-- if the G* launches are a success, and G* starts specifying actual subscription numbers that plot their initial projections. Having done some travelling lately to see what is occurring in various markets, these numbers look positive indeed. If you look at LOR on a net earnings basis, then the $50-$55/share number materializes on a forward
looking 2000 year earnings multiple, and so you get to $50-$55 in late 1999 (using a 35 p/e on the year 2000 forward earings).
Of course, there are always rumors surrounding this stock-- e.g., that G* will not really launch in February-- it will, the rumor wants to say, be in May (these rumors were circulating last week), or that C* will keep being delayed. Rumors surround Iridium World also. One hears rumors that Iridium will not gain access to China, e.g. Believe that, and you will probably believe any Wall Street rumor.
These rumors about G* and C* have no foundation. The 8 G* birds are now at the Cape. Are individuals to think the G* birds are just going to be there on the ground renting launch pad space till May? I am sure that when G* is ready to launch its third satcom set, the 12 on Zenit-2, we will hear all sorts of rumors about Russia and whatever else one can conjure. As for C*, it continues to book customers.
That is why the launches are material to an earnings projection, and why I suggested the third G* launch will be the linchpin for Loral's price assurgence. It is the satellites that are the source of Loral's revenues, and these have to be in orbit before the shareholder is rewarded. Once the market is sanguine about launch viability/occurrence, Loral should be rising in price profitably. As for all the trading on Friday, the blocks that individuals
here noted, satellite companies that hold LOR have at times to sell their holdings if they are moving into other areas. This occurred in May of 1997, and one can reasonably suggest that it happens at other times also. |
