How about shorting USW ?
Here's the reasoning:
1. baby bell's corporate culture created in an era of heavy regulation. Hard to make the transition to a competitive market.
2. Stock prices of baby bells are propped up by the fact that they have been able to thwart the intent of deregulation, and maintain local monopolies. This is, finally, coming to an end.
3. cable modems are being pushed by the Big Boys of tech (microsoft, intel), who see a bandwidth bottleneck as the limiting step holding back software and chip market growth. Cable modems will begin selling in volume in 1999.
4. after cable is the low-earth satellite networks, which will let all communications become mobile, and turn the entire planet into a single local dialing area, ending all local monopolies.
5. the baby bells have a lot of debt, from building an infrastructure that is rapidly becoming obsolete, and can't be upgraded. Max speed (in mbps): phone DSL: 1.5; cable:30 in theory, 10 really;satellite:100 (one way now, two way by 2003).
6. Specifically, why I chose US West: it is the most highly leveraged of the baby bells: (debt to equity = 54%); 5-year PE range is 7-23, and it's now at 20, near the top end; 5-year average EPS growth rate is -1(that's minus one). Not good numbers.
Can anyone think of another company more likely to lose out in the last-mile/digital convergence wars? I'm looking for something to use as a hedge for my Cisco stock, which is overvalued and just keeps on getting more so.
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