John and Freeus,
Regarding, AT&T's recent move on rates: some analysts refer to it as window dressing. It was a direct reaction to Nextel's no roaming charge. I would be happiest if competition never did anything to take market share from Nextel, but that's not realistic. In any growth industry, competition always occurs - in fact, it's healthy for the industry. I expect more competition to occur, probably some feature like Direct Connect. That's why Nextel is deploying so fast. Building a customer base and brand loyalty. I didn't really see this point until Arnie pointed it out, but in hindsight, their strategy has been brilliant - don't advertise heavily, but built subscriber base until they reach a critical mass, which it appears they have. This kept the competition from reacting earlier.
Nextel has already performed a tremendous feat by getting to where they are this fast, starting from essentially ground zero. It cost them large debt, but I believe they are using it very effectively.
Several other points: Akerson was CEO at MCI in the early nineties. Remember that MCI was going to buy Nextel (Fleetcall?) around then. Akerson knows the industry (especially MCI) very well. He can probably predict fairly well what the competition will do (maybe even before they know). Nextel is innovative (look what they've done already); they won't sit idly by and let the competition eat them. In an "Investor's Business Daily" article last week, Akerson said "the next six to twelve months should be very interesting".
Given Akerson's knowledge of the industry, he came to Nextel on the ground floor. McCaw has put over $600 M of his money into Nextel, and has options to make that number over $1.0 B. These guys have proven to be very savvy, know the industry a lot better than I do, but committed to Nextel.
Competition will continue to occur, but it won't sink Nextel. I invested into the company for the long run, knowing that the stock will follow.
Freeus, regarding Dell stock: I don't know enough about the PC industry to really evaluate the stock. O'Neil's book "How to Invest in Stocks" gives plenty of examples of stocks that have grown substatially and just keep growing. Dell has had a tremendous run-up. However, a recent financial magazine (Fortune or Forbes) put Dell on the cover with a title something like "The Last Great Computer Stock". When I see something like that it makes me a little careful about jumping in until I learn a lot more (this is a contrarian approach).
Good Luck and Skill,
Rob, Still very long Nextel |
