RE: Valuation. After quarterly results were released in October 1999, I guessed $90 in 1999. A lot has happened since then, so I think it will go much higher. Here are some of the reasons I think that (long post).
The stock was over 60 in early February, so it has "only" gone up like 17% in more than a month. The company made several announcements since February 1st that I think more than justify the increase in the stock price.
Here are some highlights from those releases and my comments in italics:
Global Crossing Ltd. Passes $1 Billion Mark for Contract Sales on Global Fiber Optic Network
Fourth quarter revenue of $205 million and net income of $56 million are records.
Fourth quarter contract sales total $285 million as backlog grows to $634 million.
Company has exceeded expectations for revenue and earnings in each of the two quarters since they went public. The company's business plan of being a "carrier's carrier" makes revenue more predictable than companies selling "X cent a minute" to the competitive end user market. Members of the "consortium," who are in some sense competitors, are also customers.
Global network buildout is on schedule. The announced network is completely funded and construction is on (or ahead) of schedule. Everyone likes credibility and predictability.
"The continuing demand from telecommunications and internet service providers for global high-speed bandwidth exceeds forecasts and fueled our growth to $1 billion of contract sales," said Global Crossing Chief Executive Officer Jack Scanlon.
"To meet that demand, we're aggressively rolling out our global network, moving from the sea onto the land with our announcements of terrestrial networks in Europe and Japan. Our announced network, when completed, will span three continents and address 80% of the world's international traffic."
"In 1999, we will introduce customized services including virtual private networks, leased private lines, and internet transit services which will be a new source of revenues," added Scanlon. "We expect sales, customer growth, and cash flow to continue to be strong."
A clear, strongly positive statement. In the CC it was stated that the "customized services" have been requested by customers. We can count of revenue from this.
Accounting for new initiatives
.... The new initiatives are expected to contribute to operating cash
flow during 1999, but are expected to reduce net income by approximately $45 - $50 million.
Accounting for start-up activities
... Global Crossing's cash flow will not be affected by the new standard, but net income in 1999 is expected to be reduced by $55 - $60 million, including a one-time charge in the first quarter of approximately $15 million, which represents startup costs spent and capitalized during previous periods.
The Management is experienced and knows how to deal with analyst: no negative surprises, explain things ahead of time. These non- cash charges were discussed in the CC and it was made clear that EBITDA and cash flow are the numbers to watch, not net income. None of the analyst had a problem with this.
Two for One split. Everyone likes a split. It could reduce the daily $3 swings (in both directions)
Global Crossing Expands Pan European Network to 24 Cities and Secures Additional Rights of Way
In Great Britain, Global Crossing will award construction on certain key routes to McNicholas Construction Company Limited which will secure rights of way and build conduits for Global Crossing in the United Kingdom. Global Crossing has also reached agreement in principle with various providers of conduits on its remaining routes in the United Kingdom.
"Our announcement today is a major step forward in continuing our development of this seamless global network, connecting the top metropolitan centres in Europe with our undersea cables to the United States, Asia, and Latin America."
Just in case you don't understand the release, they clearly state that it is "a major step forward."
Muller Travaux Publics S.A. is the contractor on the first three of the French routes.
Alcatel Contracting S.A. is Global Crossing's contractor for the fourth French route... The contracts provide for rights-of-way and construction of conduits for delivery on set dates at fixed prices.
Global Crossing has also announced a new eastern ring in Germany, which will add six cities to the Pan European Crossing network: Berlin, Dresden, Leipzig, Nuremberg, Munich, and Stuttgart. Service to these cities is projected to begin by December 1999.
Continuing the use of multiple contractors to build out the network as fast as possible.
More predictability, the contracts past the risk to the contractors: "delivery on set dates at fixed prices."
Global Crossing Names Robert Annunziata Chief Executive Officer
Annunziata spent the previous 15 years as chairman and CEO of Teleport
Communications Group (TCG), the country's first and largest competitive local exchange carrier, which he built from the ground up before selling the company to AT&T for $12 billion in 1998. TCG laid 10,000 miles of fiber optic cable and built 50 local switches connecting 85 major U.S. metropolitan service areas. Earlier in his career, Annunziata spent 17 years at AT&T in a variety of increasingly senior operations, sales and marketing positions.
One of the things that sets GBLX above other "new" companies is the experienced, well respected management. The Annunziata announcement attracted a lot of attention.
"Bob Annunziata is a world-class entrepreneur who has over 30 years of operating experience in the telecommunications industry and a track record of creating substantial shareholder value," said Founder and Co-Chairman Gary Winnick. "There is no one better qualified than Bob to build our company into the premier global telecommunications platform for the delivery of broadband services spanning data, voice, video and IP transmissions."
"I have enjoyed my second stint at AT&T and working with Mike Armstrong, but running Global Crossing is the single most exciting opportunity in telecommunications today," said Annunziata. "Global Crossing is
leading the industry in building a seamless worldwide network designed to meet the exploding demand for bandwidth to handle Internet, voice, video and data services. Without the burden of legacy equipment, we have a unique opportunity to become the global telecom operator of choice for the new millennium. I am looking forward to working with the Board, Jack Scanlon and the entire Global Crossing team to grow the company substantially and further increase shareholder value in the years
ahead."
Lod Cook, Co-Chairman, said "...Working with our strong management team, Bob will now take Global Crossing to the next level..."
Well, they know all the buzz words. Anyway, the purpose of this post is valuation:
Annunziata plans to "grow the company substantially and further increase shareholder value in the years ahead." I don't know what the stock will do next week, but I think in the future it will be valued higher than it is now.
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