Rob: My explanation: What should cause us to be concerned?
Rob: Most businesses don't like to spend money on their office structure. Why? Because this is overhead, non productive, thus, businesses operate backward. They expand, sell, produce, then realize they have a problem billing, collecting, accounting.
Nextel is in the rapid expansion mode, this business is no different than any other, at least the office part that is. Lets look at what happened. (got some of this from news reports, I added my opinion.)
1. Nextel expanded rapidly. Their expansion involved bidding, collecting, building, changing transmission cites. Fill in the blanks, we all know what Nextel is doing. In order to accomplish the expansion, Nextel needs techs to re-program and build. There is a shortage, we have a good economy, no unemployment. Nextel hires a job search firm to find people. Did they find enough, I don't know, do you? I'm concerned that they are short people and can't expand.
2. Nextel re-structures it's junk bonds, converts them to lower interest loans. We're happy, things look good. All of a sudden Nextel issues more junk bonds, almost 2 billion. Did you expect this, I didn't. They underestimated their expansion costs, and probably are trying to expand to rapidly. The interest has to affect their cash flow. I don't like that, rapid growth can kill a company.
3. Nextel borrows through the ying yang and conviently their credit rating is raised? If the ratings are wrong, and you buy Nextel junk bonds, does the rating service suffer if you loose. No, oh well too bad. Junk bonds are just what the word means, unsecured debt, junk.
4. Business expands, record subs, discount radios, well, if there is nobody in the office to catch up with this mess, some accounts become uncollectable. 55 million reserve sounds a little high to me, how about you? Looks like Nextel expects alot to be uncollectable.
In summary I'll bet Nextel's offices are a mess, low moral, overworked people, tech shortage, messed up books. The public accounting firm is probably throwing thier hands up in the air as you read this. You know what they are saying? "How the hell can we get the numbers out by Feb. 15? Shit, this company's screwed up beyond belief."
Now all this stuff that I wasted my time typing doesn't have anything to do with the value of the stock, or the market price. Even my lousy spelling has no affect. It's just that Nextel is not vogue right now, thats all. Hang on, and if you wait long enough Arnie's estimates will become fact. The only question is how long?
Regards from
Al G., sort of long in spirit. |
