Winstar Comm. (WCII) Message Board

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Technology Stocks : Winstar Comm. (WCII)

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To: SteveG who wrote (9206)	11/9/1998 10:13:00 AM
From: SteveG	Read Replies (1) of 12468

H&Q's report from last week. Note that Mark Langer (took Christine Naria's spot when she left for RS) is solo, senior analyst Noel seems no longer on WCII (though doesn't surprise me- he spreads himself so thin, one needs to be careful on his recs) Estimate Q1 Q2 Q3 Q4 FY ‘98 Rev-new 47.4 57.2 61.1 81.4E 247.3E ‘98 Rev-old 47.4 57.2 66.1E 77.4E 248.3E ‘98 EPS-new (2.54) (2.77) (2.83) (2.91)E (11.05)E ‘98 EPS-old (2.54) (2.77) (2.89)E (2.94)E (11.14)E ‘99 Rev-new 91.3E 104.1E 117.8E 137.1E 450.3E ‘99 Rev-old 89.2E 101.9E 116.3E 132.0E 439.4E ‘99 EPS-new (2.74)E (2.53)E (2.32)E (2.03)E (9.63)E ‘99 EPS-old (2.85)E (2.63)E (2.41)E (2.14)E (10.03)E Revenue Estimates in Millions • Yesterday, WinStar Communications, Inc. (WCII) reported its 3rd Quarter. The company reported a loss of ($2.83) EPS on $61.1 Million. Our estimates were a loss of ($2.89) EPS on $66.1 Million. First Call estimate was a loss of ($2.94). • The company showed growth in CLEC revenues, up 24.1% quarter-over-quarter and over 450% year-over-year. This is despite some seasonal weakness in July and August. We expect CLEC growth to accelerate during the fourth quarter. • Overall the company continues to reach its goals on schedule. WinStar's New York City operations reached EBITDA break-even during the quarter — on schedule with the company's timetable of 18-20 months from the start of build-out. This is a good indicator of what to expect from WinStar as a whole as operations in more cities mature. • For the New York operations, 54% of customers are “on-net” and 80% of customers are “on-switch.” This compares to 18% and 37% for the company as a whole. The company-wide “on-switch” number was up from 15% in Q2. • The company is beginning to see acceleration in customer sign-ups due to its Project Millennium marketing program. This program which provides a free year of local services (with a 3 year contract) for customers in 1,000 of WinStar's new on-net buildings is seeing take-up rates which are triple what WinStar was experiencing before the promotion. • We expect to get details over the next month from the company on its expanded growth plan. This plan, which is anchored by WinStar's $2 Billion vendor financing deal from Lucent, will expand WinStar's targeted network build-out from 40 cities in the U.S. to about 100 cities worldwide. • We are revising our numbers slightly. 4Q 1998 numbers move from ($2.94) EPS on $77.4 Million to ($2.91) EPS on $81.4 Million. Year end 1998 numbers go from ($11.14) EPS on $248.3 Million to ($11.05) EPS on $247.3 Million. Calendar year 1999 estimates move from ($10.03) EPS on $439.4 Million to ($9.63) EPS on $450.3 Million. • Recommendation: WinStar is beginning to hit its stride with regards to the provision of communications services. The company has grown revenues at a rate in excess of 200% for the last three quarters. During that time gross margins have expanded from less than 10% to more than 25%. These are healthy signs for an emerging carrier. WinStar continues to reach its milestones on or ahead of plan. We reiterate our BUY on WCII.

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