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Technology Stocks : PSIX up 26.5%, Takeover(?) -- Ignore unavailable to you. Want to Upgrade?

To: Curtis Gruber who wrote (4616)	7/28/1999 9:30:00 AM
From: Curtis Gruber	Respond to of 5650

SQPHL: These August 60's saw some nice volume yesterday, approximately 1200 call contracts traded. Sure hope Greenspan doens't spook the markets again, I was just getting used to $60+....don't feel like visiting the $40's again. here's to a good wed., cg

To: Curtis Gruber who wrote (4616)	7/28/1999 9:32:00 AM
From: Curtis Gruber	Respond to of 5650

Bid only up slightly at 7/16, big difference from yesterday when we were staring $60 in the face. Volume should be very thin until after 10am EST, hope we reestablish some support today, I hate ending the day so close to the intraday low. regards, cg

To: Curtis Gruber who wrote (4616)	7/28/1999 9:36:00 AM
From: Curtis Gruber	Read Replies (3) \| Respond to of 5650

Bit of news this a.m.: biz.yahoo.com good day, cg

To: Curtis Gruber who wrote (4616)	7/30/1999 4:45:00 PM
From: telecomguy	Read Replies (1) \| Respond to of 5650

There are couple of key points I would like to point out. The first is that the TRUE gross margin is NOT improving at all from 1998. If I analyze the quarterly results, it's obvious that the main reason why Psix was able to finally turn EBITDA positive was because they converted all the costs associated with leased circuits to owned circuits. So instead of expensing the data communication costs (incurred when leasing circuits), Psix is now amortizing the bandwidth asset that they purchased BELOW the EBITDA line. This is basically an accounting transfer of "real cost" associated with providing bandwidth from the gross margin line to depreciation & amortization line (which happens to be excluded when calculating EBITDA of course). This is why Psix is still losing substantial amount of money when you start adding back the depreciation, amortization & interest cost because these are REAL costs that has to be earned back at some point. In effect Psix has "purchased" or "amorized" the operating cost of data communication and dumped it below the EBITDA line. It doesn't affect cash but only because the junk bond investors have paid for it up front --- for which they will want their interest return. The fact is Psix's operational efficiency does not appear to be much better than a year ago when they were coming in at 21% gross margin level --- which is far too low to sustain a profitable business model in the Carrier business. I like the overall strategy of Psix and their positioning in the market but their operational inefficiencies will make it difficult for them to make any money any time soon.(or perhaps they are not inefficient but the IP market simply does not yield proper margins to be profitable??). On the other hand, maybe I am from old school that figures companies have to make money at SOME point or at least have an expectation. Psix's low margin, high leverage business model unfortunately will make this a very difficult goal to reach I am afraid. The bottom line is that if financing can be put to good use (buy circuits, buy customer base, build network, etc.) so that it generates HIGHER return than the cost of capital, then the Psix gamble will pay off big time........however if they can't generate a higher return than what they are able to extract from operations, it becomes a spiralling yoke that will at some point choke the ability to grow further. I got out at $35 for this reason and obviously missed out but I don't see any encouraging results (other than their ability to buy the top line revenue growth) from this quarterly report to indicate that Psix's business model will start spinning profits & cashflow any time soon (maybe in year 2005 if they can last that long)