Mark,
I haven't read any other messages from the CC so sorry if this CC debrief is repetitive. I am not writing anything that has been made obvious by GMGC through previous press releases. Also, I doubt if you listened in from Fiji:) You can look at the press release for Q1 on the internet.
My usual disclaimers apply to any info that I may not have heard or misunderstood. Anybody that reads this please feel free to correct any mistakes or omissions (ie EBAY).
1. BellSOuth has the initial deployment for a 3-4 month period and will start, I believe, in June. This agreement is exclusive for a one year period. No revenue stream during the initial deployment. BS and GMGC will split the cost of expenses. Pricing may change from the $29.95. BS collects the $29.95 from the customer, but I didn't hear any mention as to how much or even how GMGC was to be paid. There will be no 1-800 number for BS customers. A question was asked about a 2nd NOC in FL for BS. No plans as of today. They spoke about connecting BS's swith board to the NOC. I believe that they said BS hoped to get approximately 6% of the cell market to use their version of Portico.
2. Kenya will play a key role in the internet in 1999. They didn't elaborate except to talk about a program agent and talking to a speech agent.
3. Convertible holders - No series A or D have been converted. All of the B and C Series have converted (2.9 million and 7.8 million shares respectively). Series C and D holders are all the same except one small investor. The recent S3 was for the remaining 75% of the shares to be registered to sell by MSFT. MSFT has not sold or converted any shares as of today (or May 7) as far as GMGC knows. MSFT has given no indication that they will sell the shares.
4. 41.1 million shares outstanding or are tradable as of today to include the B and C holders.
5. NOC expansion - End of May the NOC in Sunnyvale will be completed in terms of the building itself. The tech equipment will be added as needed which will help in scaling the NOC to future specifications or needs. 500k is still the goal by year's end in terms of total capacity. They did NOT say that they will have 500k users (only the capacity).
6. GMGC spoke of three main sources of revenue for the future: the internet, carriers, and data providers. Portico revenues needless to say are minimal at this time and will most likely not play a big part in the future revenues of GMGC.
7. $41 million in cash, equivalents, short term assets, etc at the end of Q1.
8. Operating expenses were approximately $12.4 for Q1 and expect basically the same for Q2.
9. Future revenue - Significant revenues expected in the second half. But when an analyst (I think Merrill Lynch) asked if this meant $1 million a qtr which would be almost 10 times the current revenue, GMGC refused to discuss the actual amount of revenue they expect. GMGC did back down from the last CC when they went out on a limb and said they GUESSED they would be at the breakeven point by the end of the year. They are now saying that they are not anticipating breaking even by year's end. GMGC will see revenue from the WK deal in LATE 1999. WK revenue will still be based on minute usage. Major source of revenue will come from the internet and carriers. No specific guidance was given on future revenue from Portico and no guidance was given in terms of number of users or subscribers to breakeven (GMGC said it was too difficult to answer).
10. They spoke of using a different depreciation method and spoke of a profit/loss model like AOL/QWST. If anybody heard this please feel free to expand on what they said.
11. Saatchi and Saatchi I believe are still on board, but there currently no print advertising done by S&S.
12. The INTU (quicken) deal is progressing well.
13. Some milestones - GMGC doesn't believe any carriers will announce in Q2. For Q3, GMGC is hoping to make carrier announcements. Added Portico functionality will be added in mid 99 along with Quicken.com and also WK will most likely launch their service in July although significant revenues won't occur until late 99. GMGC wants to focus their efforts on these and possibly other milestones.
14. QWST trials will extend beyond Q2 due to the agreement between LCI and QWST. Trials I believe are still going good.
15. Nextel/MSFT deal - stated this was not Revolv and that this agreement strictly involved a web browser. GMGC didn't seem concerned or elated (IMO) over this deal. GMGC did state that MSFT is doing everything it can to get a broad of a market share as possible and that is why MSFT is engaged in all of these recent partnerships. I guess MSFT fully understands the communications explosion.
16. The internet market is very hot right now and everyone believes that voice access is important for the internet. GMGC is in talks with multiple people/companies in the internet business. GMGC spoke of possible audio ads as a means for commercial revenues in the internet arena.
17. GMGC spoke of a distribution strategy. Unfortunately I was temporarily distract during this part of the conversation. I do believe they mentioned various strategies such as Portico thru resellers, private labels by carriers, and internet branded services. I think they also mentioned something about a business and non-business strategy. The also spoke of various models which included Protico which raised revenue by minute usage on the NOC, partners such as BS who would compensate GMGC for NOC usage, and an internet model which they didn't go into great detail.
I hope I didn't bore you.
It looks as though my May 10 options that I purchased back in Nov will be about as worthless as tits on a boar hog (my apologies ladies:)).
IMO, barring any surprise announcement such as a partnership in which another company company feeds GMGC cash, I can't see any dramatic rise in the stock price through the summer. Beware that I have been wrong 100% of the time in the last year with this stock:) I don't know what the INTU deal will bring in terms of immediate revenue (this summer), but nothing looks good in the very short term.
Some of my reasons are:
1. BS's initial trial will last 3-4 months and then they will have to ramp up to get a substantial number of customers. So you are looking at the early October time frame for this ramp up and before 1 cent will be realized from the BS deal.
2. The QWST deal has been backed off (to after Q2) due to the LCI partnership. QWST will then have to aggressively market MagicTalk and this will take time to develop customers.
3. WK deal will not bring any meaningful revenue until late this year.
4. Portico ain't happening or where it is at in terms of revenue.
5. All of the announcements over the last 6 months (INTU, WK, QWST, etc) has absolutely nothing for the price of the stock. Until GMGC can show investors a definitive game plan for revenue, then institutions will stay away IMHO.
6. We have seen how long it has taken the companies in #5 above to get on board. Any new announcements will also take time in terms of bringing it to the market and producing revenue.
7. CASH crunch. I believe GMGC will need more cash (ie dilution of shares) by the end of October or November. The cash burn rate is too great and the revenues will be to small until the end of Dec or later IMHO.
The flip side is that INTU could bring in much more revenue and quicker than what has been publicly stated by GMGC. Also, WK could have either numerous companies or very large companies that will want MagicTalk immediately (ie in July).
Gotta go and hope I didn't bore you. I am still long, but much more realistic about timelines and the price of GMGC.
Take care,
Kurt
PS Watch the price of the stock skyrocket next week since I wrote the negatives for the short term:) |
