Silicon Valley: Love Is in the Airwaves for WinStar
By Jeffrey Hoffman and Dan Colarusso
Staff Reporters
8/14/98 12:46 PM ET
SAN FRANCISCO -- Thursday was a quiet morning in WinStar Communications (WCII:Nasdaq) trading. But come afternoon, fuhgedaboudit. At about 2 p.m. EDT, volume went through the roof; WinStar's share price jumped 14% in less than an hour, and at the market's close, the stock was up 10% at 33 11/16. So what gives?
Just another round of takeover-rumor mania. The mania quickly swept aglobe, with traders in Europe working the phones and WinStar options contracts raging in New York and Chicago. Officials at the New York-based wireless-communications provider declined to comment on either the stock movement or widespread speculation that the company would be bought by AT&T (T:NYSE), Sprint (FON:NYSE) or British Telecom (BTY:NYSE ADR).
Gary Holmes, a WinStar investor relations official, acknowledged that his department received "many calls" inquiring into the situation. WinStar offers wireless voice, data and video service in 16 U.S. metropolitan areas, sending calls via microwave signals.
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Chart of daily trading in WinStar shares this week.
Out-of-the-money calls, which are often traded actively during takeover plays, saw unusually high volume on both the Chicago Board Options Exchange and the American Stock Exchange. More than 1,400 August contracts to buy WinStar at 35 changed hands, while volume for August 40 -- an even riskier play -- surged to 1,374. Although much of the August 40 activity was probably tied to traders selling into the rumor mill, the activity suggests those buyers are hoping for another big move up in the stock before next Friday. Friday morning, the shares were off 11/16 at 32 7/8.
Analysts noted that Thursday wasn't the first time that rumors of a WinStar buyout have swept the market. Such speculation has pushed the company's stock up steadily in the past year. WinStar hit a 52-week high of 48 1/8 in mid-June during one such episode.
"They're the perennial subject of takeover speculation, much of it thus far unfounded," said James Henry, a telecom analyst at Bear Stearns, which helped underwrite an offering for WinStar earlier this year. "AT&T is the current subject of the speculation."
But according to Henry, AT&T is an unlikely suitor for WinStar given that the telecom-services giant completed an $11 billion acquisition of Teleport Communications Group last month. Teleport runs local fiber-optic and broadband-wireless networks in most of the country's top markets.
Henry also said he doubted that BT, another rumored buyer, would acquire WinStar. "They've recently signed a global agreement with AT&T to provide services to large corporate customers. I think that deal would preclude them from attacking the U.S. local market." Sprint's local-phone-service strategy, meanwhile, involves using the networks of regional Bell operating companies, he said.
"Bottom line, I would be surprised to see [an acquisition]," said Henry. "But the strength of the stock's move today seemed to indicate there is some basis for this talk." |
