while we wait, some BTAB comments on "THE NET-CENTRIC SERVICES
PROVIDERS (NSP) BI-WEEKLY..."
HIGHLIGHTS:
- The NSP sector trounced the S&P 500 over this two week period, returning
a hefty 15.5% versus the S&P 500's gain of 4.4%.
- Business Internet Services Providers and Web hosting stories continued to
lead the group.
- The xDSL sector is continuing to heat up from large investments and
pending IPOs.
- We reiterate our overall optimism with regard to the xDSL sector
particularly with regard to potential for future growth.
- Our publication also includes charts and tables not available in this
first call version.
DETAILS:
SECTOR COMMENTARY
Sector Performance: the NSP sector trounced the S&P 500 over this two week
period, returning a hefty 15.5% versus the S&P 500's gain of 4.4%. Business
Internet Services Providers and Web hosting stories continued to lead the
group including names such as Concentric and Exodus. Concentric's group
topping performance was driven by added analyst coverage of Web hosting
stocks across Wall Street and the realization by investors that e-commerce
begins with the infrastructure that supports the services. The market also
turned its focus to business Internet stocks over the last two-week period.
In what we believe is yet another reinforcement of the burgeoning xDSL
sector, software giant Microsoft is stepping into the telecom arena,
beginning trials of high-speed xDSL services for residential customers in
four markets. Microsoft launched trials in Atlanta and Seattle and stated
it would soon commence trials in Chicago and San Diego. The Company plans
to offer the service in at least 20 U.S. cities by fall 1999. Microsoft
said its MSN Internet Access DSL offering would provide users with Internet
access at speeds up to 8 megabits per second. The offering should
complement its recent investment of $30 million for a minority stake in
Rhythms NetConnections, with which it is developing a co-branded Web portal
for Rhythms' customer base of business end-users.
Subsequent to Covad's successful IPO in January of this year, three other
broadband services providers recently filed IPO registration statements
with the SEC including Rhythms NetConnections, NorthPoint Communications
and Network Access Solutions. Englewood Colorado-based Rhythms began
providing DSL services in San Diego in April 1998 and has subsequently
rolled out services offerings in nine other markets. The Company intends to
operate in an additional 23 markets by end of 1999 and another 17 markets
by year-end 2000. San Francisco-based NorthPoint has proposed its IPO and
provides services in 15 metropolitan areas in the United States and intends
to offer service in a total of 28 metropolitan areas by the end of this
year. Network Access Solutions offers DSL services in the Northeast
corridor with DSL equipment collocated in 44 central offices with
expectations to be in 340 offices by 2000. We continue to believe the xDSL
market is fervent and growing with an estimated 15-20% share of addressable
homes possible over the next 3-5 years and as many as 6.4 million lines in
North America by 2003. We reiterate our overall optimism with regard to the
xDSL sector and reiterate our buy investment rating on Covad
Communications.
RECENT EVENTS
Concentric (CNCX - "NR") - selected by Ticketmaster Online to provide data
center services for heavy traffic servers. To provide controlled
infrastructure for servers, management services and Internet bandwidth
through Concentric's public and private Internet peering arrangements
(4/5).
Covad Communications (COVD - "Buy") - announced xDSL service in Baltimore
metro area and partnering with 14 MD-based ISPs (4/1). Announced TeleSpeed
Remote provides connection between corporations, remote offices utilizing
Covad's AT&T & Qwest networks (3/29).
e.spire Communications (ESPI - "Buy") - Qwest signed three year contract
with e.spire to purchase PRI's in the southeast of the U.S. (4/6).
Announced appointment of Glenn A. Klenk as Senior VP of Operations,
effective April 1, 1999, a 23-year veteran of MCI (4/5). The Company
estimates its ValueWeb-hosting brand is ninth largest in the world with
more than 21,000 company sites now residing on its servers (3/30).
EQUANT N.V. (ENT - "Buy") - We expect Company to announce major LOI for
network services in Europe over next few weeks--also currently negotiating
for significant fiber capacity in Europe (4/7). Has expanded advanced fiber-
optic frame relay services to over 100 countries (3/31).
Exodus Communications (EXDS - "Buy") - to remotely host WorldStreet's
application enabling Wall Street institutional sales individuals to manage
relationships with clients dynamically. To locate servers in Exodus' Boston
Internet Data Center (IDC) (3/29).
Global Crossing Ltd (GBLX - "NR") - unveiled Atlantic Crossing 2, a new
undersea fiber optic cable linking the major cities of Europe with the
Americas and Asia. The 2.5 terabits-per-second cable will be integrated
with both cables of AC-1. AC-2 to have over twice the capacity of any
current undersea cable, expected to cost $500 million, in service 1Q 2001
(3/24).
Intermedia Communications (ICIX - "NR") - U.S. RealTel to allow Intermedia
access to 578 office properties and certain segments of its grid. Enables
Intermedia the opportunity to reach customers in more than 80 million
square feet of multi-tenant office space (4/6).
Level 3 Communications (LVLT - "NR") - signed deal worth at least $48
million with the MA Turnpike Authority to lay fiber optic cable along
roadway (4/1). With SEC guidance, reduced charge for in-process R&D to
$30MM from $115MM and increased goodwill by $85 million associated with its
purchase of XCOM. Increases 1998 EPS to $0.64 from $0.40 (4/1).
MCI WorldCom (WCOM - "Strong Buy") - second phase of UUcast service,
available June 1999, to enable businesses to send content beyond UUNET's
dial access network to U.S. end-users connecting via T-1s, T-3s and OC-3s.
Multicast Technology enables information to simultaneously reach hundreds
of thousands of users via a single transmitted stream (4/6).
PSINet (PSIX - "NR") - filed a universal shelf-registration statement with
the SEC for public offering from time to time of up to $1.0 billion of
common stock and preferred stock (4/5).
Qwest Communications (QWST - "NR") - received $1 billion revolving credit
facility for continued development of network service offerings and global
expansion (4/5). Business customers of Banyan Systems to make toll-free
phone calls on the Internet using Qwest via Web phone links from ads.
Customers to dial businesses from electronic ads to make orders/receive
information (3/29).
Verio (VRIO - "NR") - Verio, IMall and First Data Corp formed partnership
to offer small/mid-sized businesses method to set up virtual storefronts on
the Internet (4/6). Invested additional $4.4MM in NorthPoint, bringing
total investment to $10 million and is launching the companies' co-branded
xDSL services to businesses in 13 additional U.S. markets (3/31).
REGULATORY EVENTS
Comments due on 4/12 to the FCC on its notice of proposed rulemaking on the
jurisdiction of dial-up calls to ISPs--replies are due 4/25.
UPCOMING EVENTS
Intermedia Communications (ICIX - "Buy") - public offering of Digex Web
hosting business.
BT Alex. Brown Media Communications Conference - 6/7/1999.
We are reiterating our investment ratings and price targets as follows:
COVD - "buy" investment rating on the shares and a 4Q 1999 estimated price
target of $60 (enterprise value of 17.9x our 2000 revenue estimate and DCF
analysis), ICIX - "buy" investment rating on the shares and a 4Q 1999
estimated price target range of $30 (enterprise value of approximately 3.7x
our 1999 revenue estimate of $908 million), ENT - "buy" investment rating
on the shares and a 4Q 1999 price target of $84 (enterprise value multiple
of 13.1x 2000 estimated revenue and DCF analysis), ESPI - "buy" investment
rating on the shares and a 4Q 1999 price target of $30 (enterprise value
multiple of 4.4x forward net PP&E), EXDS - "buy" investment rating on the
shares and a 4Q 1999 price target of $100 (enterprise value of 15.9x our
1999 revenue estimate), WCOM - "strong buy" investment rating on the shares
and a 3Q 1999 estimated price target of $95 (33.8x our 2000 EPS estimate of
$2.81).
DUE TO REPORT
Ticker Report Date EPS Est. Time (EST) Phone
CNCX TBD NA TBD TBD
COVD TBD ($0.79) TBD TBD
ESPI 1ST Week May ($1.32) TBD TBD
ENT NA NA NA NA
EXDS 4/21 ($1.13) 2pm TBD
GBLX TBD NA TBD TBD
ICIX 4/28 ($2.30) 8:30am 888-937-3934
IIXC TBD NA TBD TBD
LVLT TBD NA TBD TBD
PSIX Last Week April NA TBD TBD
QWST 4/19 NA TBD TBD
VRIO Last Week April NA TBD TBD
WCOM TBD $0.32 TBD TBD
|
