Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: David N. Kunkel who wrote (4636)	8/3/1999 1:50:00 PM
From: telecomguy	Read Replies (1) \| Respond to of 5650

Hi Mr. Kunkel....first of all there is no real "purpose" behind my posts for Psix as you correctly remembered that I got out at $35 mainly due to the non-improving picture of Gross Margin and general uneasy with the whole Internet sector being over-valued. I just had some time to look at the recent quarterly report and noted the fact that if you added back the D&A, the true gross margin really has not improved. It is true that Psix is also spending money to build out additional POP's and transoceanic circuits and there is certainly value associated with that and it may even explain why when you are laying off leased cost and replacing it with the owned bandwidth cost that is "one-hundredth" of the leased circuit cost --- the gross margin still doesn't improve. The question is how much of the non improvement in gross margin is attributable to costs associated with the build-out......I would have expected most of these costs are BELOW the D&A line since they involve network engineers/operators, etc.etc.? Psix business approach is very complex and certainly there aren't any precedents to compare it to.....it may be that the IP market for Wholesale and Commercial vertical markets simply do not yield the kind of margin required to (1) make absolute profits and (2) throw enough cashflow to maintain the network assets. One thing I do know about the IP market, it is ruthlessly cut-throat compare to the Telco/PTT world (all because they own the last mile and have monopoly position in many countries) so the question is whether Psix can ever make money even in the long-term with the pricing benchmark that we see where the internet bandwidth/access is being traded off as a loss-leader for market share and or for supporting other business opportunities (advertising, e-commerce,etc.) If the bandwidth/access becomes a loss-leader and a means-to-an-end for lot of key players in the business, where does that leave Psix other than to somehow transform itself into a good old Telco Carrier which has it's own set of challenges. I feel that bandwidth/access business margins will be brutal (for example we are seeing incredible pricing competition at the wholesale level in the Telecom world where I can buy 1 minute of voice path from US to UK for under 2 cents US!. Certainly at that price Internet Telephony is a non-starter if it ever was in the first place. It seems to me that unless you have huge scale and horde of cash, it's going to be difficult to make any money in the wholesale Carrier market whether it's data or voice. But of course this is only my opinion and who knows what crazy changes will drive the IP market in the next 5 years. All I can say with certainty is that fortunes will be made and fortunes will be lost and there is no guarantee for ANY company treading this unknown digital territory.

To: David N. Kunkel who wrote (4636)	8/6/1999 12:30:00 AM
From: Curtis Gruber	Read Replies (2) \| Respond to of 5650

David, when it says " PSINet acquired IRUs (indefeasible rights of use) for cable ", these are for 20 years, is that correct? And then it says " company has begun to acquire the out-right ownership of physical cable". What is the difference? With the IRU's are we merely leasing for 20 years as opposed to owning them outright? If so what is the benefit of owning one over the other? And in 20 years, when PSIX owns the world, and I am sitting on the BOD, then what do we do? (Before I forget, thanks to Lupaka on the Yahoo board for providing the analyst report) Wild day today, while the two days previous saw that 20% drop from intraday high to intraday low, coincidentally,after our early morning low to $35.75, we experienced a 20% rise in the span of a few hours to close at $43.5. To me, it seemed like more volume on the initial downdraft, but not by much, I don't have the equipment to break down the number of sales/by or their amts. I did notice big blocks on both sides, including some after hours buys of 5k,3.2k & 8.5k, which had been preceded by a fairly large 13.6k sale. regards, cg(happily doubled my position today in Psinet)