Steven:
You present some very interesting analysis, provided some of your key assumptions are valid.
1. Most importantly, your entire analysis rests on the validity of Vogel's and other analyst numbers.
Now I'm not saying it's not possible, just highly unlikely. Are you really that certain that a revenue stream will go from $40 million to $30 billion over the next 10 years? In a world where communications solutions are being developed and implemented all day long?
2. You assume that margins for telecommunications services will stay where they are.
Although the demand for telecommunications is exploding, I believe the solutions and advances in computer technology are driving the cost of access south, not north. Bandwith is not a limited commodity, despite Winstar's insistence that 38Ghz licenses are the be-all and end-all. The competition for connecting people is everywhere, from the Internet providers to the CLECs, to the RBOCs. As all these companies desire to get consumers, competition will drive prices lower.
3. You assume that even if the future is so bright for Winstar, they will have enough money to stay the course.
Currently, Winstar is running out of money. Will more be provided? Tough to say. I guess at some level of interest rate they can always sell more debt, although the interest rates would be more crippling than they already are.
They could always sell more stock. This wouldn't seem that difficult, given the bullish nature of this crowd. But remember, all the bondholders still need their cash. And that's over a billion dollars of future earnings before the stockholders ever see a penny.
Winstar's remaining option is to eventually be aquired when they run out of money. Not impossible. Given the current landscape of telecommunications, Winstar's wireless local loop may indeed have some value for a larger telecommunications company. But at what price would they be acquired? I'm always nervous buying stock when I have to rely on the greater fool theory bailing me out, rather than bankable earnings.
I don't mean to be a bearer of bad tidings. Just trying to point out the truth. This thread has a lot of knowledgeable people, with good insight into Winstar, and I'd love to have a serious discussion about Vogel's and other analyst numbers. At least then we'd have an idea what the underlying assumptions are.
Regards,
Jason Cogan |
