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Technology Stocks : NEXTEL
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To: Al Gutkin who wrote (6087)5/12/1998 10:15:00 AM
From: John F. Dowd  Read Replies (1) of 10227
 
Dear Al: They need to do better than 400,000 adds this qtr. as well as maintain the avg monthly bill around 65 to keep pace with their past sequential qtr'ly rev. growth. If they don't do that and their GSA keeps climbing as it has been (= to revenue growth) and their interest costs keep growing in absolute terms they will be challenged by the large stockholders at the meeting. A perusal of the 10K's shows that the operational leverage Cost of ops decreasing as revs. grow is the only bright spot in terms of what bean counters are interested in while GSA and Interest Charges and Taxes are increasing (in fact faster than rev. growth). Therefore if the quarterly additions falter it is very crucial to this highly leveraged company. Therefore in the absence of any public announcement maybe somebody has a better insight than we do about the numbers of new customers added since Jan 1 and what the rev. per customer is: For instance if they add 400,000 this qtr but only do $58 vs. $66 per sub than that is an effective add of only 351,000 (at $66) or in other words a slowing of the rate of rev. growth. This might cause nervousness and this in turn would be reflected in the stock. Without the prodigious growth in revs. that this company has displayed to date NXTL is a "scary" and highly leveraged company that under its present business model has to be fed ever increasing amounts of cash. I noticed in the 10K that the depreciation charge is down - this is another loss to cash generation.
Perhaps someone knows something in greater detail about Rev. generation than we do is my guess.

JFD
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